2012 Annual Report

Transcription

2012 Annual Report

Safestore Holdings plc
Annual report and financial statements 2012
Safestore the things you love
Market leaders
in self-storage
With 123 stores, Safestore and Une Pièce en Plus
are the self-storage market leaders in the UK and Paris.
Safestore Holdings plc Annual report and financial statements 2012
Overview
Overview
Business review
Financial statements
02
Chief Executive’s review
20
Independent auditors’ report 62
Overview of the year
04
Financial review
26
Personal customers
06
Consolidated
income statement
63
Business customers
08
Scale where it matters
10
Consolidated statement
of comprehensive income
64
Business model
and demand drivers
Consolidated balance sheet
65
12
Strategy
14
Consolidated
statement of changes
in shareholders’ equity
66
Chairman’s statement
16
Consolidated cash
flow statement
67
Notes to the
financial statements
68
Governance
32
Prinicipal risks
38
Board of Directors
40
Executive team
44
Directors’
remuneration report
46
Audit Committee report
54
Nomination
Committee report
55
Corporate governance
56
Directors’ report
Statement of Directors’
responsibilities
Independent auditors’ report 96
Company balance sheet
97
59
Notes to the Company
financial statements
98
61
Notice of Annual
General Meeting
102
Proxy form
107
Directors and advisers
109
Governance
Corporate social
responsibility
Business review
Headlines
01
Overview
Headlines
Strategic progress
and financial resilience
Overall, we have delivered good progress on our strategy
and resilient financial performance.
6x
02
Our total storage capacity
at the end of 2012 is enough
to fill the Olympic Stadium
six times.
Overview
Operational highlights
Financial highlights7
—— Closing occupancy1 up 2.5% to 3.29 million sq ft
or 63.9% of Maximum Lettable Area (“MLA”)
—— Revenue up 5.5% and Revenue per Available Foot
(“RevPAF”)2 & 3 up 5.2% in constant exchange
rates (“CER”)
—— Underlying EBITDA4 after strategic investments
down 0.4% to £50.3 million but up 0.8% in CER
—— Initial impact of the introduction of VAT in the
UK remains in line with original estimates
—— EPRA5 adjusted EPS on a cash tax basis6 down
0.43 pence (3.9%) to 10.56 pence per share
—— Four new stores opened during the year, completing
the planned store expansion programme
—— Property valuation reduced by 4.0% to
£685.8 million, reflecting imposition of UK VAT
and adverse currency movements, with a resulting
loss before tax, including re-financing costs,
of £19.5 million (year ended 31 October 2011:
profit before tax of £8.5 million)
—— Full re-financing of the Group completed
—— Group to apply for conversion to Real Estate
Investment Trust (“REIT”) status with effect
from 1 April 2013
—— Basic EPS – loss of 4.16 pence per share
(year ended 31 October 2011: earnings of
6.95 pence per share)
1 Closing occupancy excludes offices but includes 82,800 sq ft of bulk tenancy as at 31 October 2012 (31 October 2011: 67,200 sq ft).
2 RevPAF is calculated as total revenue divided by total MLA excluding the five stores opened since 1 May 2011.
3 RevPAF for the year ended 31 October 2011 has been restated from £18.99 because of the exclusion of trading for Gonesse which opened in H2 2011 consistent with the current reporting.
4 EBITDA before exceptional items, contingent rent, fair value movement of derivatives and movement in investment properties (“underlying EBITDA”).
5 European Public Real Estate Association (“EPRA”).
6 EPRA adjusted EPS (cash tax only) removes the impact of deferred tax movements leaving only the tax charge which will actually be paid.
7 All figures are stated net of VAT.
Underlying EBITDA (£m)
Revenue (£m)
98.8
12
11
95.1
89.2
10
12
50.3
11
50.5
10
49.2
84.4
09
45.7
08
82.9
08
45.1
Ancillary revenue (£m)
Dividend (pence per share)
12
13.8
11
08
09
09
Governance
—— Final dividend increased by 7.0% to 3.80 pence
per share, bringing total dividend to 5.65 pence
per share
10
Business review
—— Strong growth in UK business customers,
which now account for more than half our
total occupancy
13.2
12.2
11.5
10.9
12
5.65
11
10
5.30
4.95
09
4.65
08
4.65
03
Overview
Overview of the year
Strengthening
Safestore
We’ve moved the Company forward
in the past year with a new Brand Identity,
new stores and rebranded stores.
A new look and feel
for Safestore
We’ve created a new
look and feel for our
brand with a clearer
distinctive identity.
04
Overview
Improving store visibility
Orpington
Chingford
before
before
Business review
after
after
Governance
We took the opportunity to rebrand a number of high
visibility stores during the year.
Four new stores
New Southgate
November 2011
Gonesse
January 2012
Staines
February 2012
We opened four new stores in the year. Two in London at New Southgate,
north London and Staines near Heathrow airport. Two are in the Paris
market at Gonesse, close to Paris – Charles de Gaulle airport and Velizy
to the south-west of the city.
Velizy
July 2012
05
Overview
Personal customers
Safestore
the things you love
We’re raising the profile of self-storage in the UK.
Watch our
new TV ad
www.safestore.co.uk/TV
More than one million people
viewed the ad on YouTube
Safestore aired its first TV ad
campaign this year.
06
Overview
Your personal
storage solution
Business review
Moving house? New home not
ready yet? Renovating, redecorating
or decluttering your home? Relocating
abroad? Can’t get your car in the garage
for hobby or sports equipment? Or having
a big clear out? There are dozens of
reasons why you might need somewhere to
store your personal possessions.
Governance
We understand the pressures
involved in moving house or
relocation especially if your
new home is not ready. Our
great customer service and
expert advice helps to make
storing your belongings safe,
easy and stress free.
Our storage locations, local to you,
offer a wide variety of unit sizes, from
lockers to large rooms and are suitable
for storing a huge range of items.
07
Overview
Business customers
Best for business
Is your business expanding or simply overstocked? Need
space for stock, equipment, promotional material or archive
documents? Need to free up valuable office or work space?
Renovating, relocating or decorating your business? There are
dozens of reasons why you might need Safestore.
73%
73%
27%
27%
52%
52%
48%
48%
We have a balanced mix of personal and
business customers with 52% of our space
occupied by business customers and 48%
by personal customers.
During the year we increased the size of our
National Accounts sales force to help us reach
more large scale national customers across
the UK.
Justin works as one of our Store Managers
and works closely with our National Accounts
team to give our business customers the
solution they require.
08
Overview
Flexible space
to help you grow
Business review
We provide a flexible and affordable alternative solution
to renting commercial space whilst also ensuring that
business customers stock is safe and secure, helping
to take away the burden of managing multiple storage
units, deliveries and other logistical concerns.
Our National Accounts
Our national network matters – 76% of the
National Accounts occupancy is outside London.
With our UK network of stores we can deliver
business solutions nationally.
Governance
Our National Accounts occupancy
was 43% up on the prior year to
more than 200,000 sq ft.
09
Overview
Scale where it matters
More Space
where you need it
We have a market-leading position in the UK and Paris. As at
31 October 2012 our wholly-owned portfolio included 123 stores
– 98 in the UK and a further 25 in Paris.
Your local
self-storage
company
Lok’n Store
We have 123 stores across the UK and Paris meaning
we have more stores than any other storage company
in the UK and Paris.
Because of this we can offer great prices in the most
convenient locations.
UK stores only
10
24
Overview
Safestore
98
Business review
42,000
We have more than 42,000
customers at Safestore.
Big Yellow
54
66
Governance
Access
11
Overview
Business model and demand drivers
A straightforward
business with
strong demand
Our straightforward business model
drives sustainable performance...
Pr
it
of
Enq
uir
ies
We focus the business on
improving efficiency and
delivering profitability.
Store
locations
Reven
io n
rs
ve
v
rA
le
Foo
t
ai
la b
12
S al
e
o
sc
n
pe
We set the right rental rate
to grow our occupancy and
optimise our Revenue per
Available Foot.
ue
Revenue per Available
Foot (“RevPAF”)
Enquiries and service
ice
erv
ds
an
Profit
We use our sales and
marketing system to create
customer enquiries from
both personal and
business customers.
Sales conversion
We drive sales enquiry
conversion rate through
customer service and clear
product offers for different
customer needs.
Overview
Our staff are always on hand to
help our customers find the best
solutions to their needs.
Business review
... And we make sure we continually
meet our customers’ demands.
Keeping spaces uncluttered
Lifestyle demand
eg. students, marriage, new
baby, divorce, bereavement
“We found space at Safestore because we’d acquired so many
possessions over the years that when we moved in together we didn’t
have enough room. Safestore was extremely useful because it was
so local to us and their stores are nationwide so we knew we’d
always be near one no matter where we move to next.”
Governance
Rental/owner
occupier demand
eg. rental moves,
housing transactions
eg. small businesses,
national accounts,
archiving
“I needed help quickly as my house purchase failed and I didn’t want to lose my
buyer. I contacted Safestore and they were able to provide the amount of space
I needed to clear my house the following day. This helped relieve the pressure
at a very stressful time while I sorted out some temporary rental accommodation.
I don’t know what I would have done without them.”
Business demand
A growing rental market
More space for my business
“I ran my small online trading business from home, as I expanded and before I knew
it my house became so full of stock I was having to climb over things to get around.
Safestore was the perfect solution for me, I rented a room at my local store not two
miles from home and my stock is delivered directly there, when my stock comes in
I am able to increase the space I need and then reduce it again when the stock
starts to sell through. I don’t know why I didn’t do it earlier.”
13
Overview
Strategy
Our More Space
strategy
“More Space” focuses the Group on delivering organic growth, by using
our scale, marketing power and pricing expertise to drive occupancy,
RevPAF and profitability.
As we deliver this organic growth, our intention is to use the free cash flow
generated principally to maintain a progressive dividend for our shareholders
and progressively reduce our debt as appropriate.
Underpinning our strategy
are four strategic priorities
that guide action, targetsetting and remuneration
across Safestore:
1. Strengthen the brand
2. Build a powerful team
3. Drive operational
excellence
4. Create value
14
Overview
Strategic priority
Progress in 2012
Improving our online presence
Raise the profile of our brands through
effective sales and marketing.
—— We launched an upgraded website and new mobile site.
Build a
powerful team
NCO accredited
Develop our people so they can deliver great
service and maximise their potential.
—— We strengthened the UK call centre team that supports our stores. The team
handles direct enquiries to our free phone number, and enquiries made when
the store is closed to ensure a rapid response.
Deliver efficient service by leveraging our
self-storage experience and scale through
processes, tools and systems.
Secure strong returns on our property
investments by maintaining a focus on
delivering sustainable growth.
—— We rebranded a number of high visibility stores.
—— We aired our first television advertising campaign.
—— We increased the size of our national accounts sales force to help us reach
more large scale customers across the UK.
Handling and optimising demand
—— We introduced a new pricing model with changes to our software system.
—— During the second half of the year we launched a new pricing platform which
gives us greater flexibility and this will be the key driver of price efficiency in 2013.
Experimenting with price tests
—— During the year we regeared a number of leases including those at Sunderland,
Croydon, Hanworth and New Malden.
—— We let under-utilised space unsuitable for self-storage at a number of locations
as well as delivering a number of successful rate appeals.
—— We also completed a successful re-financing of the Group’s facilities.
15
Create value
—— We introduced a new look and feel brand to Safestore in the UK.
Governance
Drive operational
excellence
Business review
Strengthen
the brand
Overview
Chairman’s statement
Strategic progress
and financial resilience
We are pleased to report another year of strategic progress and
financial resilience during the year ended 31 October 2012.
Richard Grainger
Chairman
16
Overview
Strategic progress
While the strategy has delivered encouraging
results, the Group has faced external pressures
that have impacted overall financial performance.
Economic conditions in both the UK and France
remain challenging. While the UK economy
essentially remained similar to last year, the
unexpected imposition of a new 20% rate
of VAT on the entire self-storage industry
during the fourth quarter of our financial
year placed pressure on new customer
conversion. In France, while our underlying
business delivered good levels of growth
in constant currency, we were negatively
impacted by a 10% decline in the value
of the Euro against Sterling during
the second half of the year.
—— average occupancy was 272,000 sq ft or
9.0% higher than last year at 3.28 million sq ft
(FY2011: 3.01 million sq ft) with closing
occupancy up by 80,000 sq ft or 2.5% to
3.29 million sq ft (FY2011: 3.21 million sq ft);
—— the average self-storage rental rate
decreased by 2.9% in CER and 4.6%
in Sterling to £24.91 per sq ft (FY2011:
£26.11 per sq ft); and
—— ancillary revenues were up 4.4% to
£13.8 million (FY2011: £13.2 million).
Store EBITDA increased by 4.3% in the UK
and 2.2% in France in constant exchange
rates. Underlying EBITDA decreased by 0.4%
to £50.3 million (FY2011: £50.5 million) after
taking into account movements in foreign
exchange rates and our targeted strategic
investments in marketing, pricing and sales.
There was a £1.8 million reduction in
EPRA defined Group earnings, the standard
measure across the Real Estate sector which
excludes movements in our property valuation.
EPRA Group earnings were £14.3 million
compared to £16.1 million for the year ended
31 October 2011. Our underlying performance,
measured by EPRA earnings on a cash
tax basis, fell by £0.8 million, or 3.9%, to
£19.8 million from £20.6 million for FY2011.
Our strategy and operational performance is
covered in more detail in the Chief Executive’s
review on pages 20 to 25. Further details on
the results for the FY2012 and FY2011 are
included in the Financial review on pages 26
to 31.
Property valuation
As at 31 October 2012, the total value of the
Group’s property portfolio was £685.8 million,
down £28.6 million from £714.4 million at
31 October 2011 and down £4.6 million from
the half year valuation of £690.4 million at
30 April 2012. Underlying trading assumptions
and capitalisation rates have remained similar
to prior year levels. The principal drivers of
the valuation change have been the impact
of the introduction of 20% VAT on self-storage
in the UK and adverse movements in foreign
exchange rates. Further details of the property
valuation and the movements therein are
provided in the Finance report.
Re-financing
The Group successfully re-financed its
facilities during the first half of the year,
extending maturities and diversifying our
lending base. The Group’s facilities now
include a term loan, a revolving credit facility
and a substantial private placement of
long-term loan notes in the US. Full details
are set out in the Finance report.
Overall, we have delivered good progress on
our strategy and resilient financial performance.
These solid results leave us confident in the
fundamentals that underpin our industry,
in which we have a leading market position,
and in the strength of our business model,
the quality of our operational teams and
our prospects for the future.
Revenue for the year was £98.8 million, 4.0%
higher than last year (FY2011: £95.1 million)
and 5.5% higher in CER. The key drivers for
revenue growth continue to be movements
in self-storage occupancy, rate per sq ft
and ancillary revenues:
Governance
In January 2012 we outlined our “More Space”
strategy. Early results have been encouraging,
with gains in brand awareness, significant
growth in business customers and greater
occupancy. At the store level, both sales
and profitability have improved in constant
exchange rates. The Group also completed
its planned store expansion programme
during the year. We opened two new stores
in London and two in Paris, all of which are
performing in line with our expectations.
Financial resilience
Business review
We are pleased to report another year of
strategic progress and financial resilience
during the year ended 31 October 2012.
17
Overview
Chairman’s statement continued
The Board remains confident in the prospects for the Group and
is pleased to recommend a final dividend of 3.80 pence per share.
Conversion to REIT status
Dividend
The Company intends to convert to REIT
status with effect from 1 April 2013.
Following our intended conversion to
REIT status, the Company will be required
to distribute 90% of the profits generated
from its UK property rental business by way
of a Property Income Distribution (“PID”).
Safestore’s present dividend is more than
twice the level of the PID that would currently
be required were the Company to be a REIT
and is supported by earnings not just from
the UK property rental business but also
by earnings which lie outside REIT status,
including UK ancillary sales and the
French business.
Safestore is an operational business that
derives much of its income from the rental
of property in the UK. As our current new
store expansion programme comes to an
end and the benefit of significant capital
allowances begins to reduce, there are
meaningful advantages to our shareholders
from converting to REIT status. These include
reduced UK tax liabilities and a resulting
improvement in cash flow and earnings.
Since the passing of the UK Finance Act in
2012, the significant conversion charge for
becoming a REIT has been abolished and
the Board believes now is an appropriate
time to convert to REIT status.
Shareholder approval for the required changes
to the Articles of Association of the Company
will be sought at an Extraordinary General
Meeting to be held following the Annual
General Meeting on 20 March 2013. Further
details will be circulated to shareholders in
due course.
Further details relating to REIT status, its
advantages and requirements can be found
in the Chief Executive’s review on page 25.
18
The Board remains confident in the prospects
for the Group and is pleased to recommend a
final dividend of 3.80 pence per share, bringing
the total dividend to 5.65 pence per share for
the year. This final dividend represents an
increase of 7.0% versus FY2011.
Following REIT conversion, the Board intends
to maintain its progressive dividend policy,
growing the dividend broadly in line with
earnings over the economic cycle while
maintaining appropriate dividend cover.
Overview
Business review
People
Outlook
During the year, our team members in both the
UK and France continued to be the key drivers
of the success of the business. I would like to
take this opportunity to thank all my colleagues
throughout the business for their hard work
and dedication this year.
The economic environment continues to be
challenging. However, self-storage demand
remains solid in both the UK and France.
Richard will be succeeded by Andrew Jones,
who joins us from Worldpay Limited. Andrew
brings a valuable understanding of similar
customer-focused and yield-managed
operational businesses from his current role
and earlier career at TUI Travel plc and Virgin.
We are very pleased to welcome Andrew
to Safestore.
To ensure a smooth transition, Richard will
remain with the Group until his successor
is in place, which is expected to be not later
than 31 July 2013.
We expect the year ahead to remain challenging
with slightly lower sales than the prior year.
In that context, we retain our tight focus on
cost control and expect to deliver further cost
efficiencies to mitigate the expected revenue
pressure. Overall we expect performance for
the current financial year to remain broadly
consistent with the level experienced during
the last financial year.
With strong underlying demand potential and
modest new supply growth, self-storage remains
a growing sector. As awareness of the product
increases, our clear strategy, market leadership
position and scale leave us well positioned
to withstand the short-term challenges and
capitalise on the opportunities ahead.
Full details of these changes to the Board
are set out in a separate announcement
issued today.
Governance
We have announced that after more than a
decade with the Group, our Chief Financial
Officer, Richard Hodsden, has indicated his
intention to step down from the Board and leave
the Company. Richard has been instrumental
in the Group’s development and the Board
would like to express its sincere gratitude
for the valuable contribution he has made
to the success and development of the
Company. We wish Richard the best
with his future endeavours.
As we forecast, during the first few months
of the new financial year, the imposition of VAT
on the UK self-storage industry has resulted
in lower UK occupancy and rate than last
year’s record levels. While it remains too early
to assess the full effect of VAT, the initial
impact is consistent with the original estimates
we set out in June 2012. In France customer
demand remains solid, although the slowing
economy has led to greater growth from
personal customers than from businesses
in recent months.
R S Grainger
Chairman
30 January 2013
19
Business review
Chief Executive’s review
A year of change
at Safestore
We continued to make good progress on the
More Space strategy outlined
in January 2012, with gains in brand
awareness, business customer
growth and improved pricing
capabilities being delivered
during the year. Peter Gowers
Chief Executive Officer
20
Overview
Revenue (£m)
£98.8m
+4.0%
Strategic and financial progress
We are pleased to report that Safestore
has delivered further strategic progress
and financial resilience during the year.
We continued to make good progress on the
More SpaceSM strategy outlined in January 2012,
with gains in brand awareness, business
customer growth and improved pricing
capabilities being delivered during the year.
We tightly controlled administrative costs
and made the planned strategic investments
in strengthening marketing, National Accounts,
yield management and call centre operations
during the year. These strategic investments,
together with the impact of weaker Euro
exchange rates on the translation of our
French earnings into Sterling, resulted in
Group underlying EBITDA being slightly
lower than last year.
The Group completed a full re-financing
of its debt facilities in the first half of the year,
extending the average maturities of its debt
and diversifying its lending base.
Demand for self-storage is fuelled by two
principal customer groups:
Personal customers – individuals and
families in the process of moving house,
undertaking refurbishments or simply
needing to free up more space at home
as a result of lifestyle changes.
Business customers – companies storing
stock and archiving materials as an alternative
to having their own warehouse or office and
large companies using self-storage as a
partner for logistics.
New supply growth in our chosen markets is
modest, with significant planning restrictions
on new development, particularly in central
London and Paris, and limited access to
capital for many of our smaller rivals.
Operationally, customers are increasingly
turning to the internet as the start point for
researching self-storage. This, together with
the opportunities to serve large businesses
that use self-storage for nationwide logistics,
raises the competitive importance of marketing
scale and a widespread store network.
Our store network
We have a market leading position in the UK
and Paris markets. As at 31 October 2012 our
wholly-owned portfolio included 123 stores
– 98 in the UK and a further 25 in Paris. This
network gives us a unique footprint in both
the UK and Paris, delivers marketing scale
and positions us well to serve the needs
of key customers.
During the year we opened four new stores
in the key markets of London and Paris. Two
are in the London market at New Southgate
in North London and Staines near London
Heathrow Airport. Two are in the Paris market
at Gonesse, close to Paris – Charles de Gaulle
airport, and Velizy to the south-west of the city.
The Group also has three development sites
in the UK – at Chiswick and Wandsworth in
London and Birmingham. We continually
review the value of these sites to the Group
and while they remain very attractive, in line
with our present strategic focus on organic
growth, there are no current plans to open
stores at these locations.
+2.5%
Our strategy
In January 2012 we set out our “More Space”
strategy to deliver value to shareholders.
“More Space” focuses the Group on delivering
organic growth, by using our scale, marketing
power and pricing expertise to drive occupancy,
RevPAF and profitability. As we deliver this
organic growth, our intention is to use the
free cash flow generated principally to
maintain a progressive dividend for our
shareholders and progressively reduce
our debt as appropriate.
Underpinning our strategy are four strategic
priorities that guide action, target-setting
and remuneration across Safestore:
1. Strengthen the brand
2. Build a powerful team
3. Drive operational excellence
4. Create value
Last January we announced our intention
to make a planned strategic investment in
strengthening our marketing, improving
our National Accounts, UK call centre and
pricing teams and developing our website.
£1.8 million of this investment was introduced
during the year. This focus and investment
has been delivering tangible benefits and we
made good progress on each of our strategic
priorities during the year:
The self-storage market
Both segments have remained resilient
throughout the recent economic downturn.
We estimate that there are more than eight
million homes and businesses that may need
more space in the UK. With penetration of
self-storage in both the UK and France at
much lower levels than in the more developed
US and Australia markets, we believe there
is significant further demand potential.
3.29m sq ft
Governance
The Group also completed its planned store
expansion programme, with the addition of
four new stores during the year. This good
strategic progress resulted in gains in
occupancy, revenue and store level EBITDA.
+5.2%
Closing occupancy
Business review
Introduction
RevPAF
Strengthen the brand – improving
brand visibility and customer reach
Safestore is the UK market leader for
self-storage and we have opportunities
to build on this position with improvements
in our brand image and recognition.
During the year, we introduced a new look
and feel for Safestore in the UK to support
our positioning as a distinctive, premium,
professional and friendly brand.
21
Business review
Chief Executive’s review continued
We launched our newly branded website
and mobile site earlier this year.
Our new stores at Staines (top) and
New Southgate (bottom).
Our store network continued
Strengthen the brand – improving brand
visibility and customer reach continued
Greater prominence is now given to the
colour blue, the Safestore name and the
padlock symbol in our advertising, point
of sale materials, website and in our stores.
These changes promote a more consistent
appearance and help raise awareness of
our brand.
In line with this new look and feel, as part
of our planned maintenance programme we
took the opportunity to rebrand a number of
high visibility stores during the year, including
those at Staples Corner, Chingford, Fulham
and Holloway in London; Orpington in Kent;
and Old Trafford in Greater Manchester.
The new brand look and feel was deployed
online with an upgraded website that now
allows customers to see online prices for
multiple stores. This led to an increase in
the percentage of visitors to our website that
subsequently choose to enquire and significant
growth in online enquiries. Over 80% of all
our enquiries now originate on the internet.
During the year Safestore ran its first television
advertising campaign, airing principally in the
London television regions. The advertisement
generated an unprecedented level of interest
for the Group online, with more than one million
views of the advert on the YouTube internet
video site. Taken together, the conventional
television airtime and online media presence
contributed to a 150% increase in unprompted
awareness in the important London region.
22
Our strategic focus on driving value from
business customers has continued. For the
first time, business customers now account
for more than half of our total space occupied
in the UK.
A key driver of our growth has been our
National Accounts team. During the year we
increased the size of our National Accounts
sales force to help us reach more large scale
national customers across the UK. By the
year end, National Accounts customers
occupied more than 200,000 sq ft or almost
7.9% of our total UK occupancy, an increase
of 43% on the prior year. Approximately 76%
of the space occupied by National Accounts
is outside London, indicating the growing
importance of our national network.
Build a powerful team – improving
alignment and productivity
During the year we strengthened the UK
call centre team that supports our stores.
The team handles direct enquiries to our
free phone number and enquiries made when
stores are closed to ensure a rapid response.
The team handled almost 29,000 enquiries in
the last financial year, helping support store
revenue growth.
Drive operational excellence –
optimising pricing
In operational terms, our main focus was
the introduction of a new pricing model with
attendant changes to our software systems.
In the past, the self-storage industry generally
offered a simple model of a fixed price, with a
number of weeks free. However, this structurally
reduced the attractiveness of the product for
highly valuable long-term users and offered
limited flexibility in pricing different room sizes
and durations of stay. During the second half
of the year we launched a new pricing platform
that gives us greater flexibility and this will be
a key driver of price efficiency during FY2013.
Create value – effective asset
management and capital structure
Effective management of our property
portfolio remains a key focus for the team.
During the year we regeared a number of
leases on our properties including those
at Sunderland, Croydon, Hanworth and
New Malden. We also let under-utilised
space unsuitable for self-storage at a number
of locations as well as delivering a number
of successful rates appeals. A number of our
self-storage locations may have alternative
use potential and work continues to evaluate
and exploit these as appropriate.
During the year the Group completed a
successful re-financing of its facilities, which
now include a term loan, a revolving credit
facility and a long-term US private placement
component. The Group was in compliance
with the associated covenants to its debt
facilities at 31 October 2012. Full details
of the new arrangements are set out in
the Financial review.
Overview
Closing occupancy levels
Developing
Established
Mature
Large
Operational review – Group
During the year, our strategic progress
contributed to further revenue and store
EBITDA growth.
Our effective pricing strategy, which balanced
rental rates and occupancy throughout the year,
led to improvements in the total sq ft let across
the business. We delivered steady gains in
our developing stores and large stores, while
broadly maintaining occupancy levels in the
established stores and mature stores, after
taking into account the impact of the imposition
of VAT. The closing occupancy levels as a
percentage of MLA are as shown above.
Performance in each of our trading areas
is set out above.
Operational review – UK
Despite the continuing economic challenges
and the imposition of 20% VAT on self-storage
from 1 October 2012, we saw a resilient
performance during the year. In line with our
“More Space” strategy, the focus during the
year was on making use of our national scale
and marketing power to drive improved levels
of occupancy, particularly from businesses,
at the optimal rental rate.
Enquiry levels have remained high throughout
the year, with continued customer demand
for self-storage.
Occupancy
31 October
2012
12
18
81
8
46.5%
53.9%
68.8%
67.1%
11
20
84
8
48.1%
60.4%
66.7%
68.4%
119
64.4%
123
63.9%
Total sales were up 5.3% to £74.8 million
(FY2011: £71.1 million). We saw a 9.8% or
228,000 sq ft increase in average occupancy
during the year. Year-end closing occupancy
was up 1.8% or 44,000 sq ft on last year’s
record occupancy level to 2.54 million sq ft
(FY2011: 2.50 million sq ft). Business customer
occupancy has been particularly strong. As at
31 October 2012, 1.41 million sq ft or 55.5%
of all our UK occupied space was filled by
business customers and 1.13 million sq ft
or 44.5% from personal customers.
In line with our pricing strategy and the
mix effect on rate of a growing share of
our occupancy being delivered in recently
opened stores with lower average price
points, our average rental rate decreased
by 4.0% to £23.43 (FY2011: £24.40).
Number of customers (Group)
73%
Personal 31,442
Business 11,471
27%
Store EBITDA was up 4.3% to £44.2 million
and was impacted by the opening costs for the
final two stores in our UK expansion programme.
RevPAF (excluding the two stores opened
since May 2011) was up 6.0% to £18.56
(FY2011: £17.51).
52%
4
Impact of VAT on self-storage
remains within initial estimates
In March 2012, the UK government set out
a proposal to introduce a new 20% tax on all
self-storage rentals in the UK with effect from
1 October 2012. This represented a significant
change, reversing the long-standing exemption
from VAT that the UK self-storage sector enjoyed
in common with other real estate businesses.
Resilient performance
In the UK we have 98 stores and 4.10 million
sq ft of MLA. All our owned and leased UK
stores are branded as Safestore.
Number of
stores
31 October
2012
Governance
During the first half of the year we saw good
revenue growth, driven by a balance of strong
occupancy gains and lower rental rates than
the prior year. In the second half of the year,
we saw slower occupancy performance but
improving rental rates up until the introduction
of 20% VAT on UK self-storage. The French
business, while performing well in constant
currency, was affected by the declining value
of the Euro during the second half of the year.
Occupancy
31 October
2011
Business review
Total
Number of
stores
31 October
2011
The Company acting together with the UK
Self-Storage Association (“SSA”) sought to
challenge the decision during the formal
consultation period. However, the government
maintained its position and the measure took
effect on 1 October 2012. An exceptional cost
of £175,000 is included in the accounts for
charges relating directly to the imposition
of the new tax as well as our participation in
the consultation process and legal review.
23
Business review
Chief Executive’s review continued
Operational review – UK continued
Operational review – France
Impact of VAT on self-storage
remains within initial estimates continued
Since 1 October 2012, the Group has been
obliged to charge full 20% VAT on all eligible
self-storage rentals in the UK. In effect this
increases the total cost of the product to our
customers by 20%, although many business
customers may have the ability to reclaim the
VAT if they are VAT registered.
Strong constant currency growth affected
by adverse exchange rate movements
We now have 25 stores in France, accounting
for 1.04 million sq ft of MLA. All our French
stores are branded as Une Pièce en Plus
(“A Spare Room”). This network gives us a
leading presence in the Paris region, a market
with close to twelve million people, attractive
socio-demographics for self-storage and high
barriers to entry due to the lack of available
land and the competition with other uses,
as well as new planning restrictions.
Our strategy has been to pass on the
cost of the VAT increase to our customers
wherever possible. We have, however,
offered some selective discounts for
certain high value customers.
As we forecast, this unplanned and very
rapid change in the industry’s tax status has
impacted performance. During the fourth
quarter of the year we saw approximately
51,000 more sq ft vacated than we would
have had expected had the VAT measure
not been in place. Since the year end, we
have seen a reduction in the pace of new let
growth although this has been accompanied
by a moderate improvement in average
move-in rate.
Taken together, the impact of VAT on existing
and new business appears within the original
estimates we provided in June 2012, which
were for an annual revenue impact of £5 million
to £6 million and an EBITDA impact in the order
of £2 million to £3 million. We will, however,
continue to monitor the situation closely.
24
With a strong brand and unrivalled store
network right in the heart of the affluent areas
of the city of Paris, we saw strong performance
despite the slowing of the French economy.
We continued to focus on maintaining
performance in our already highly occupied
central stores, while benefiting from our
recent expansion into strategically located
new stores around the suburban markets
of the city.
Enquiries remained solid. Total revenue was
up 6.3% to €29.3 million (FY2011: €27.6 million).
The business delivered a 6.6% or 44,000 sq ft
increase in average occupancy, with closing
occupancy 5.0% or 35,000 sq ft higher
than the prior year at 746,000 sq ft (FY2011:
711,000 sq ft). As at 31 October 2012,
0.30 million sq ft or 39.7% of all our French
occupied space was filled by business
customers and 0.45 million sq ft or 60.3%
from personal customers. Average rental rate
was broadly flat at €36.72 per sq ft (FY2011:
€36.64). Store EBITDA was up 2.2% to
€20.7 million, reflecting the incremental costs
of new stores that opened part way through
the year and have yet to reach break-even.
RevPAF (excluding the three stores opened
since May 2011) was up 2.5% to €27.59
(equivalent RevPAF at 31 October 2011 was
€26.92). This good performance in constant
currency was, however, significantly impacted
by a negative movement in the Euro Sterling
exchange rate, which fell by almost 10% during
the second half of the year, compared to the
same period last year. As a result, RevPAF,
in Sterling, was down 3.5% to £26.01
(FY2011: £26.94).
Operational review – cost of
sales and administrative costs
Tight management of costs and carefully
targeted strategic investment
Operationally, Safestore has a straightforward
business model. Each store typically has
three–four full-time equivalent team members
and the stores are supported by a number of
regional managers and the head office teams.
The principal cost of sales items are therefore:
—— rent for our leasehold stores;
—— sales and marketing (principally
advertising and online search);
—— staff costs (annual salaries, taxes and
incentive payments);
Overview
“Under the new rules, the Board believes that
REIT status has attractions for the Company
and its shareholders. The Company therefore
intends to convert to REIT status.”
material capital expenditure in relation to new
stores during the current financial year.
—— local business taxes (business rates
in the UK).
Conversion to REIT status
We have tightly controlled cost of sales,
with more efficient online marketing and
careful control of team costs. After stripping
out the impact of new store costs and strategic
expenditure, underlying cost of sales have
increased by 4.1%. This was principally driven
by the increasing costs of utilities and local
business taxes. More details are given in
the Finance report.
After stripping out the impact of the strategic
investment noted above, one off provision
releases and the impact of foreign exchange,
underlying administrative costs were up by
3.1%. Once again, more detail is given in the
Finance report.
Operational review –
capital expenditure
During the year, capital expenditure was
£19.2 million, of which £6.2 million was
principally safety and security, store
improvements and reconfiguration and
£13.0 million related to new stores. Following
the completion of our four new stores during
the year we do not anticipate there to be any
The UK government believes that this
“double-tax” situation hinders a healthy
property market and therefore created the
Real Estate Investment Trust (“REIT”) status.
REIT status is open to property companies
generating the majority of their profits from
UK property income and removes the
corporation tax liability and some capital
gains tax liabilities providing certain conditions
are met, including a mandatory requirement
to pay a PID of 90% of the distributable UK
property profits.
In order to encourage investment in property
and the use of REIT status, as part of the
Finance Act 2012 the UK government altered
the rules relating to eligibility. These changes
included the removal of the previous entry
charge that was levied to become a REIT,
which had been up to 2% of the value of the
assets within the REIT.
—— increases free cash flow by removing
a number of tax liabilities;
—— increases the ease of comparability
to other property-based companies;
—— improves transparency; and
—— potentially extends the shareholder
base to include certain REIT-only
investment funds.
The Company therefore intends to convert
to REIT status. As REIT status requires a
change to the Company’s Articles of Association,
principally in order to comply with legal
provisions relating to the size of individual
shareholdings in the Company, the Board
will seek shareholder approval for the
changes at an Extraordinary General Meeting
on 20 March 2013. Once this approval is
obtained, the Company will formally submit
its application for REIT status.
Subject to HMRC approval, REIT status is
then expected to take effect from 1 April 2013.
Following that date, Safestore will cease to
provide for corporation tax on its
UK property income.
The Company will, however, continue to be
assessed for appropriate taxes on its UK
ancillary incomes and French property and
ancillary income, which are not eligible for
UK REIT status as they do not relate to UK
property income.
Safestore’s principal capital expenditure
items are the continued provision of safety
and security for our customers and team
members, store maintenance, reconfiguration
of store layouts to drive sales and selective
new store openings.
Over recent years, owing to carried forward
tax losses and capital allowances, the Company
has not been a cash tax payer in the UK,
although we have provided for deferred taxes.
However, as the Company concludes its store
expansion programme and the capital
allowances that presently reduce our UK tax
liability begin to wind down, Safestore’s UK
tax liability would normally begin to rise,
raising a potential “double-tax” liability for our
shareholders that is greater than the liability
if shareholders were to simply invest in the
properties directly.
—— removes the “double-tax” faced by
current shareholders;
Governance
Administrative costs principally include
staff costs for head office teams including
the Directors, marketing and other public
company related costs. During the year, we
strengthened the teams for National Accounts,
pricing and field support and reduced the
costs of our property development team
in line with our organic growth focus.
Safestore generates the majority of its UK
profits from the rental of self-storage property.
At present, the Company is assessed for
UK corporation tax on these profits and
then our shareholders may be assessed
for income tax on the dividends they receive
from the Company.
Under the new rules, the Board believes that
REIT status has the following attractions for
the Company and its shareholders:
Business review
—— utilities (principally electricity
and phone); and
Under REIT status, the Group will be well
positioned to create value from its new
organic growth strategy.
Peter Gowers
30 January 2013
25
Business review
Financial review
Revenue growth
and increased occupancy
The Group’s revenue increased by £3.8 million (an increase of 4.0%)
from £95.1 million in FY2011 to £98.8 million in FY2012.
International Financial Reporting
Standards (“IFRS”)
This report is prepared in accordance with IFRS and details
the key performance measures during the year.
Revenue
Richard Hodsden
Chief Financial Officer
Revenue for the Group is primarily derived from the rental
of self-storage space and the sale of ancillary products,
such as insurance, and merchandise, such as packing
and storage products, in both the UK and France.
The table opposite sets out the Group’s revenues
by geographic segment for FY2012 and FY2011.
The Group’s revenue increased by £3.8 million (an increase
of 4.0%) from £95.1 million in FY2011 to £98.8 million in FY2012.
As covered in the Chief Executive’s review, the key drivers
for revenue growth have been the increase in average
occupancy (272,000 sq ft year on year), the reduction in
average rate per sq ft (4.6% year on year) and ancillary
revenues (+4.4% year on year).
There has been a significant currency impact during the
year with an average exchange rate of €1.223:£1 for FY2012
against an average rate of €1.152:£1 for FY2011 which has
impacted revenue adversely by circa £1.3 million.
26
Overview
Results of operations
The table below sets out the Group’s results of operations for the year ended 31 October 2012 and the year ended 31 October 2011, as well as
the year on year change:
Year ended 31 October
2012
£’000
Revenue
Cost of sales
98,836
(34,665)
Gross profit
Administrative expenses
2011
£’000
95,060
(31,222)
+4.0%
64,171
63,838
+0.5%
(9,818)
(15,476)
54,353
48,362
Loss on investment properties (including exceptional impairment charge in FY2011)
(37,536)
(18,417)
Operating profit
16,817
29,945
Net finance costs (including exceptional items)
(36,280)
(21,398)
(Loss)/profit before income tax
Income tax credit (including exceptional items)
(19,463)
11,670
8,547
4,481
(7,793)
13,028
+12.4%
-43.8%
Business review
Operating profit before loss on investment properties
(Loss)/profit for the year
% change
Revenues by geographic segment
Year ended 31 October
% of total
2011
£’000
% of total
% change
UK
France
74,898
23,938
75.8%
24.2%
71,014
24,046
74.7%
25.3%
+5.5%
-0.4%
Total revenue
98,836
100.0%
95,060
100.0%
+4.0%
Cost of sales
Cost of sales consists primarily of our store costs, staff salaries, business rates, utilities, insurance and maintenance. The Group’s cost of sales
increased by £3.4 million or 11.0% from £31.2 million in FY2011 to £34.7 million in FY2012.
£’000
Cost of Sales (“CoS”) FY2011
Compensation for store relocation
Governance
2012
£’000
£’000
(31,222)
(609)
(609)
Adjusted like-for-like CoS FY2011
(31,831)
New store operating costs
(1,170)
Incremental strategic investments
Underlying costs increased by 4.1% year on year
(363)
(1,301)
(2,834)
(34,665)
There are three key elements to the cost increase:
—— the operating costs associated with the new stores opened in the year of £1.2 million;
—— incremental strategic investments, mainly call centre related, of approximately £0.4 million; and
—— underlying cost of sales has increased by £1.3 million or 4.1%.
27
Cost of Sales FY2012
Business review
Financial review
Administrative expense
During the year our underlying administrative expense increased by approximately £0.6 million to £13.9 million in FY2012 from £13.3 million
in FY2011 as set out in the table below:
Financial year
2012
£’000
2011
£’000
Reported administrative expenses
Adjusted for:
– exceptional items*
– depreciation
– contingent rent
– changes in fair value of derivatives
(9,818)
(15,476)
(4,875)
445
758
(384)
1,333
168
642
8
Underlying administration expenses
(13,874)
(13,325)
Underlying administrative expenses for FY2011
Strategic expenditure
VAT provision released in year
FX (including currency swaps)
Other administrative cost movements (3.1%)
(13,325)
(1,403)
528
744
(418)
Underlying administrative expenses for FY2012
(13,874)
* Exceptional items are detailed below.
Underlying administrative expenses have increased by £0.6 million. The main elements of the increase are:
—— approximately £1.4 million of the increase is directly attributable to strategic investments made in the marketing, yield management
and National Accounts functions during the year;
—— we have benefited in the year by £0.5 million relating to the release of a historic VAT provision no longer required and £0.8 million from
the positive impact of foreign currency translation including over £0.5 million from currency swaps in the year; and
—— the balance of £0.4 million relates to a 3.1% increase in the general underlying administrative expenses of the business.
EBITDA before exceptional items, contingent rent, change in fair value of derivatives and loss
on investment properties
Underlying EBITDA is calculated as follows for FY2012 and FY2011:
Financial year
Operating profit
Adjusted for
– loss on investment properties
– impairment of investment property
– depreciation
– contingent rent
– change in fair value of derivatives
Exceptional Items:
– insurance proceeds
– VAT and REIT related costs
– impairment of non-current assets
– costs relating to retirement of CEO and other restructuring costs
– costs relating to re-locating French head office
Underlying EBITDA
2012
£’000
2011
£’000
16,817
29,945
37,536
—
446
757
(384)
16,187
2,230
168
642
8
(5,260)
220
—
165
—
—
—
382
702
248
50,297
50,512
The Group’s Underlying EBITDA decreased by £0.2 million or 0.4% to £50.3 million in FY2012 from £50.5 million in FY2011. This decrease principally
reflects the increase in revenues discussed above offset by the higher cost base and strategic investments in FY2012.
28
Overview
Loss on investment properties
The loss on investment properties consists of the fair value revaluation gains and losses with respect to the investment properties under IAS 40,
finance lease depreciation for the interests in leaseholds and one off items as detailed below:
Financial year
2012
£’000
Movement on investment properties
Finance lease depreciation
Capital Goods Scheme VAT write back
Exceptional impairment of investment properties
2011
£’000
(10,669)
(5,518)
—
(2,230)
(37,536)
(18,417)
The movement in the investment properties reflects the combination of yield movements within the valuations together with the impact of changes
in the cash flow metrics of each store. In a normal year the key variables in the valuations are rate per sq ft, stabilised occupancy, number of months
to reach stabilised occupancy and the yields applied. In the current financial year adverse valuation movement is primarily driven by the imposition
of VAT on self-storage in the UK which took effect on 1 October 2012. As a direct result of the imposition we will be able to reclaim VAT previously
written off under the Capital Goods Scheme. We have estimated that the present value of the amount to be reclaimed is £9.0 million and will be
reclaimable over the next ten years.
Business review
(42,200)
(4,336)
9,000
—
The valuation of investment properties is covered in more detail in the property section below.
Operating profit
Operating profit decreased by £13.1 million or 43.8% to £16.8 million for FY2012 from £29.9 million in FY2011. This movement predominantly
reflects the £19.1 million swing in the investment properties from a loss of £18.4 million last year to a loss of £37.5 million this year partly offset
by the £6.0 million positive movement in exceptional items.
Net finance costs
Net finance costs consist of interest receivable from bank deposits as well as interest payable and interest on obligations under finance leases
as summarised in the table below:
2011
£’000
Bank interest receivable
Bank and other interest payable
43
(18,875)
212
(18,552)
Net bank interest
(18,832)
(1,805)
(9,969)
(5,674)
(18,340)
1,825
—
(4,883)
(36,280)
(21,398)
Fair value movement of derivatives
Exceptional finance expense
Interest on obligations under finance leases
Net finance costs
Governance
Financial year
2012
£’000
The reduced bank interest receivable reflects the lower cash balances held through FY2012.
Bank and other interest payable increased by 1.7% to £18.9 million in FY2012 from £18.6 million in FY2011, although this is after capitalising
interest of £0.2 million (FY2010: £0.3 million). The interest costs reflect the higher level of drawn bank debt in FY2012 together with the higher
blended interest rate following the re-financing in May 2012.
The exceptional finance expense of £10.0 million (FY2011: £nil) represents the debt issue costs relating to the previous banking facility written off
and the new debt issue costs of the new bank facilities. These costs have been expensed as prescribed by IAS 39.
Following the re-financing in May 2012, the Group replaced its existing interest hedge agreements to August 2013 with new hedge agreements
to coincide with the new facilities. As a result the Group has interest hedge agreements in place to June 2016 swapping LIBOR on £197 million
at an effective rate of 1.710% and EURIBOR on €40 million at an effective rate of 1.361%. The hedge agreements provide cover for 80% of the
drawn debt leaving a 20% floating element. Interest payable includes a charge of £1.8 million in respect of the fair value movement of derivatives
(FY2011: £1.8 million credit).
Interest on finance leases was £5.7 million (FY2011: £4.9 million) and reflects part of the rental payment under UK GAAP. The balance is charged
through the investment loss line and contingent rent in the income statement. Taking the movements as a whole, the UK GAAP rental charge is
down by £0.5 million to £10.8 million this year from £11.3 million last year primarily resulting from lease re-gearings in the year and the acquisition
of the freehold interest in one store in FY2011.
29
Business review
Financial review continued
Gearing
Net debt at 31 October 2012 stood at £394.2 million up from £384.9 million at 31 October 2011. During the year, total capital decreased by
£22.4 million to £637.6 million at 31 October 2012 from £660.0 million at 31 October 2011. The net impact is that the gearing ratio was 62%
at 31 October 2012 compared to 58% at 31 October 2011.
Income tax
Income tax for FY2012 was a credit of £11.7 million against a credit of £4.5 million for FY2011. The actual cash tax payable for FY2012 was
£450,000 (FY2011: £365,000), all of which arose in France. The low level of cash tax payable is due to the exceptional financing costs incurred
during the year, the availability of capital allowances in both the UK and France and the offset of French tax losses. The utilisation of losses in
France is now expected to be annually restricted to €1 million and 50% of the remaining profits following the introduction of recent legislative
changes. In respect of deferred tax, an exceptional credit of £6.3 million (FY2011: £6.6 million) arose following re-measurement due to changes
in UK corporation tax rates which is explained further in note 8.
(Loss)/profit for the year (“Earnings”)
Earnings were a loss of £7.8 million compared to a profit of £13.0 million for FY2011.
EPRA adjusted earnings, which is the earnings figure after adding back the loss on investment properties, exceptional items, changes in fair value
of derivatives and the tax thereon, decreased by £1.8 million or 10.9% to £14.3 million for FY2012 from £16.1 million for FY2011. Further details
of this are given in note 10.
Property valuation
Cushman & Wakefield has again valued the Group’s property portfolio. As at 31 October 2012, the total value of the Group’s portfolio (including
£0.8 million of owner occupied properties) was £685.8 million. This represents a decrease of £28.6 million or 4.0% compared to the £714.4 million
valuation as at 31 October 2011. A reconciliation of the movement is set out below:
UK
£m
France
£m
Total
£m
France
€m
Value as at 1 November 2011
546.6
167.8
714.4
191.1
New stores opened in the year
14.1
10.5
24.6
Adverse currency translation movement
Revaluation of French like-for-like portfolio1
Revaluation of UK like-for-like portfolio
—
—
(39.2)
(14.0)
—
—
(14.0)
—
(39.2)
12.9
—
0.1
—
521.5
164.3
685.8
204.1
Value as at 31 October 2012
1 The revaluation fall in the UK like-for-like portfolio is primarily related to the imposition of VAT on self-storage in the UK with effect from 1 October 2012.
The table above summarises the movement in the property valuations:
—— New stores opened in the period have increased the valuations by £24.6 million; £14.1 million in the UK for London – New Southgate
and London – Staines and £10.5 million for Paris – Gonesse and Paris – Velizy.
—— The exchange rate at 31 October 2012 was €1.241:£1 compared to €1.139:£1 at 31 October 2011. This movement in the foreign exchange rate
has resulted in a £14.0 million adverse currency translation movement in the period. This will impact the net asset value (“NAV”) but has no
impact on the Loan to Value (“LTV”) covenant as the assets in Paris are tested in Euro.
—— The revaluation of the French like-for-like property portfolio was flat, year on year.
—— The revaluation of the UK like-for-like property portfolio shows a reduction of £39.2 million compared to October 2011 although this valuation
decrease is primarily attributable to the impact of the imposition of VAT on self-storage in the UK. It is not possible to absolutely quantify the
impact in isolation given the integrated approach undertaken by the Company in response to this challenge. We know that, at the half year,
the special valuation assumptions around VAT reduced the UK valuations by £24 million and it is reasonable to assume that the impact at
31 October 2012 has increased from this level.
—— The Group freehold exit yield for the valuation at 31 October 2012 was 7.85% which is broadly flat with the exit yield of 7.83% adopted
at 31 October 2011.
The weighted average annual discount rate for the whole portfolio has followed a similar trend to exit yields.
The Company’s pipeline of expansion stores is valued at £5.4 million as at 31 October 2012.
The property portfolio valuation has declined by £4.6 million from the valuation of £690.4 million at 30 April 2012 which combines the impact
of the opening of the new store at Paris – Velizy (+£6.1 million) and a further deterioration in the Euro exchange rate (-£2.1 million) with the balance
being mostly attributable to the impact of VAT on the UK portfolio valuations.
In their report to us, our Valuer has drawn attention to valuation uncertainty resulting from exceptional volatility in the financial markets and a lack
of any transactions in the property investment market. Please see note 11 for further details.
The adjusted EPRA NAV per share is 188.6 pence, down 10.8% on October 2011. The main contributory factors in this movement are the
adverse impacts of the movements in the Euro exchange rate and the impact of the imposition of the VAT of self-storage in the UK.
30
Overview
Cash flows
The following table summarises the Group’s cash flow activity during the FY2012 and FY2011 in accordance with IFRS:
Financial year
2012
£’000
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash provided by financing activities
Net decrease in cash and cash equivalents
2011
£’000
30,457
(21,498)
(16,109)
25,649
(36,649)
10,107
(7,150)
(893)
Business review
Net cash inflow from operational activities
There are two main factors influencing the £4.8 million increase in cash from operating activities in FY2012 compared to FY2011. This is made
up of a combination of increased cash generated from operations, the movement in exceptional items between FY2012 and FY2011 offset by
movements in working capital and increased interest payments.
Cash outflow from investing activities has decreased by £15.2 million to £21.5 million for FY2012 from £36.7 million for FY2011. Whilst there
are several contributing factors affecting this movement it is mainly due to the decrease in expenditure on investment and development assets.
Expenditure on investment and development properties in FY2012 was £20.2 million, a decrease of £14.8 million from £35.0 million in FY2011.
The single biggest movement is the non-recurrence of the acquisition of the freehold interest in our Pentonville Road store for £11.5 million in
the previous financial year.
Net cash inflow from financing activities
The cash flows from financing activities decreased by £26.2 million in FY2012 to an outflow of £16.1 million from an inflow of £10.1 million in FY2011.
This has several key factors which are set out on the face of the cash flow statement but mainly reflects the costs associated with the re-financing.
Future liquidity and capital resources
Governance
Borrowings under the existing bank facilities are subject to certain financial covenants and the Group is in compliance with its covenants at
31 October 2012 and, based on forecast projections, for a period in excess of twelve months from the date of this report. The debt facilities
do not mature until August 2016 with US private placement facilities running to May 2019 and May 2024 respectively.
Re-financing/bank facilities
In May 2012, the Company re-financed its £385 million debt facilities due to mature in August 2013 with new increased facilities of £400 million.
These new facilities comprise bank facilities of £270 million and €70 million and a US private placement of $115 million. There is no amortisation
on the private placement and minimal amortisation on the bank debt. Subsequent to the year end we reduced the UK Revolving Facility by
£10 million in line with ending the existing store roll out programme.
The bank facilities have been extended to June 2016 with a bank margin ratchet between 2.5% and 3.5% based on interest cover performance,
with an initial bank margin of 3.5% for the first six months of the facilities. For the private placement, $67 million was issued at 5.52% with 2019
maturity and $48 million was issued at 6.29% with maturity in 2024. The proceeds of the private placement issue have been fully swapped into
fixed Sterling.
The bank facilities and the US Private Placement share interest cover and Loan to Value covenants.
Our business model
Safestore has a straightforward business model.
We then tightly control our costs, which are principally staff costs, utilities, local taxes and marketing, to drive operating margin.
The combination of these actions drives growth in free cash flow, which we use to generate dividends, retire debt and selectively invest
in improving our store network and its performance.
Annual General Meeting
The Meeting will be held on 20 March 2013 at the Group’s registered office, Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT,
following which a general meeting to approve certain amendments to the Company’s Articles of Associate to enable the Group to elect for REIT
status shall be held. Notices for both meetings are expected to be sent to shareholders shortly.
R D Hodsden
30 January 2013
31
We use our scale to market our self-storage facilities to customers and create enquiries. We use our customer insight and operating skill
to convert enquiries into occupancy and we manage pricing and business mix to drive the self-storage rental rate and ancillary revenues.
Governance
Corporate social responsibility
Operating in an
ethically and socially
responsible way
Throughout the year we have continued to evolve our
stakeholder engagement programme based on our
commitment to sustainable business practice.
Corporate Responsibility (“CR”)
Highlights
At Safestore we strive to deliver an engaging
CR programme supportive of our principal
commitments to our four stakeholder
groups that is pivotal in how we progress
our business.
—— Our efforts have been accredited for
the fourth year running with continuing
membership of the FTSE 4 Good Index.
—— Our marketplace
“At Safestore we strive
to deliver an engaging
CR programme
supportive of our
principal commitments
to our four stakeholder
groups that is pivotal
in how we progress
our business.”
32
—— Our people
—— Our community
—— Our environment
We continually aspire to improve on our CR
standards and commitments and consider
this fundamental in our goal to deliver the
highest standards of customer satisfaction,
whilst making good business sense.
As we have progressed through FY2011/2012
our CR strategy has been fully supported by
the Group Board. This ensures that our
approach supports both our wider purpose
statement and Safestore’s values and
strategic priorities.
Our Executive Team takes ownership for
ensuring that our plan is delivered in every
business area. With the support of the Senior
Management Team this means our plan is far
reaching involving both head office together
with regional and store colleagues. By taking
this approach we are able to ensure that
each and every member of the team is able
to participate with and influence how we
develop our CR plan for the future delivering
maximum stakeholder value.
—— We were delighted to introduce a new
CR award at our annual conference
in celebration of all the hard work our
regional teams are putting into developing
our CR programme.
—— We ran our unique dash to donate initiative
for the third consecutive year collecting
1,674 bags of saleable items for Scope,
equivalent to approximately £34,000,
supporting their hard work helping
disabled people and their families.
—— Once again FY2012 saw further
expansion to our community partners
programme as we welcomed Hands
on London as a new charity partner
supporting their Wrap Up London 2012
campaign where 8,520 coats were
collected and distributed to shelters
and refuges in London.
Overview
A new state of the art call centre for
our Customer Support Centre team.
Business review
Safestore and our marketplace
We will:
—— maintain a customer engagement
programme that aims to continually
deliver “best in class” standards
of customer service;
—— be an active member of the Self-Storage
Association; and
—— work proactively with council planners
and the broader community regarding
our store development programme.
Customer Support Centre
During the year we invested in state of the
art call centre space for our Customer Support
Centre team (“CSC”) who helped 28,935
customers during FY2012. This investment
will enable us to continue to innovate how
we interact with customers and to extend
customer reach across both new
and emergent channels.
VOICE
Quarter three of FY2012 saw us start to explore
real customer feedback as we trialled a text
response system across two regions. This
method of live customer feedback measures
each stage of the customer journey from
enquiry through to vacate and can be viewed
from a store, regional, CSC and head office
perspective. Following the trial’s success
which saw customer sentiment grow by 5.4%,
we plan to launch VOICE across our entire
business during FY2013.
—— support the evolution of the broader
self-storage sector and actively participate
in industry forums and conferences to
share best practice;
Space Specialists
During the year our Space Specialists
programme which sets our standards in
customer care has continued to go from
strength to strength. Our premium, professional
and friendly approach is supported by expert
knowledge and advice enabling us to explore
our customers’ unique reason for storage and
delivering a tailored solution. A key measure
of our success is customer feedback which
was assessed during the year through our
mystery shopping scheme. This saw results
improve by 2.5% year on year.
Governance
Policy statement
We support our primary goal of optimising
shareholder and investor value by providing
clear and easily obtainable information on
our business to customers, colleagues,
suppliers and the wider community, adopting
a consultative approach wherever practical.
This ensures that business decisions are
made having taken into account stakeholder
needs whilst balancing our short and
longer-term CR aspirations.
33
Governance
Corporate social responsibility continued
As an “Investors in People” organisation,
we aim to be an employer of choice and
we believe our success is dependent on
a motivated and highly trained team.
Safestore and our people
Policy statement
Our colleagues play a pivotal role in helping
our customers and we are passionate in
providing a diverse CR programme that
ensures they are truly placed at the heart
of our business. This helps our colleagues
in achieving their goals and is underpinned
by our commitment to attract and retain the
very best talent to shape our future success.
We provide a healthy and safe environment
for our people, customers, suppliers and
contractors. Safestore always complies
with current legislation and endeavours to
continuously exceed legal requirements
and local regulations by:
Health and safety
—— Conducting regular health and safety
reviews across our estate inclusive of the
review of risk assessments and accident
reports to identify, control, prevent and
nullify potential risks.
—— Ensuring our health and safety committee
meets regularly to review issues, process,
policy and actions harnessing a culture
where health and safety always sits high
on our agenda.
Equality and diversity
—— Being an equal opportunities employer
that maintains a workforce that reflects
the uniqueness of the communities in
which we operate.
Work life balance
—— Delivering through our colleagues
engagement programme support to
our people in achieving a healthy work
life balance.
—— Ensuring policies and practices are in
place that treat all employees fairly and
equally. All colleagues receive the same
treatment regardless of their ethnic origin,
gender, sex, sexual orientation, age,
religion or belief, or disability.
—— Providing a range of initiatives that
celebrate the cultural diversity of our
colleagues including: graduate internships,
an apprenticeship scheme developed in
association with Street League, a tax free
cycle to work scheme and “Busy Bees”
child support.
—— Continuing to nurture the talents of our
people and the benefit they bring to our
varying business functions through a
clearly defined and transparent
competency framework.
—— Honing a culture of fair treatment
regarding recruitment and promotion,
making decisions solely based on ability,
aptitude and role requirements as outlined
in our competency framework.
—— Maintaining an active succession
planning strategy that considers the
ability of internal colleagues before
recruiting externally.
—— Delivering accredited health and safety
training and refresher training relevant to
job role as standard to all colleagues.
34
—— Encouraging our staff to engage in
our accredited Careerstore training and
development programme providing them
with individual training and a tailored
development path.
—— Engaging in programmes that encourage
our people to self learn and develop with
funding for professional qualifications.
Training
As an “Investors in People” organisation since
2003 our aim is to be an employer of choice
and we passionately believe that our continual
success is dependent on our highly motivated,
well trained colleagues. We are delighted that for
the year FY2012 our people have participated in
over 11,000 hours of training time.
Overview
“Safestore has supported the disability charity Scope since 2008.
Income raised from the partnership enables Scope to run services
such as Scope Response, a free information and advice service that
supports disabled people and their families. Every ten minutes, a family
finds out their child is disabled. Scope’s support can make a critical
difference in a disabled child’s early years.
Business review
At a time of unprecedented government funding cuts, demand on
Scope’s services from disabled people and their families is greater than
ever. It is vital that we work with supporters like Safestore to raise funds
and save costs. This year Safestore assisted Scope by generously
providing free storage and in May collected 1,674 bags of donated
stock for our charity shops worth £34,000. Safestore’s support is very
important to Scope and we would like to thank everyone involved for
their generosity.”
Richard Hawkes
Chief Executive
Scope
This training consisted of:
—— the continued delivery of Safestore’s
bespoke Space Specialist programme
enabling our colleagues to be experts
in self-storage who, by putting their
customers first, take pride in delivering
the best solution for them;
—— people management courses
which focus on team and individual
motivation, performance management,
different learning preferences and
leadership styles;
Promotions
31 colleagues were successfully promoted to
a more senior position; this is a similar level
to the prior year.
—— provide local support for the communities
in which we operate through our “charity
room in every store scheme”;
Payroll giving
For the fifth consecutive year we were awarded
the Payroll Giving Bronze Award in April 2012.
We remain committed to supporting UK charities
and payroll giving offers our colleagues an easy
way of donating to their charity of choice.
Safestore and our community
Policy statement
As an employer with a national UK footprint
we recognise and embrace the significant
opportunity this presents to work with many
communities across the UK. We aim to seek
out both practical and creative solutions to
involve our wider community and continue
to do this in ways that deliver support that is
wider reaching than that of a cash value or
donation. This is achieved by working in
partnership with a number of charitable
causes at both Group, regional, store,
departmental and team level.
—— provide national charity support through
partnering with a charity of the year striving
to build long-term relationships;
—— use our communications platform to assist
charitable partners in raising awareness of
their cause inspiring others to get involved;
—— consider requests for community support
helping initiatives where we feel our available
resources can add the most value; and
—— meet our charitable partners regularly to
nurture existing relationships and objectively
consider new charitable requests.
Scope
For the fourth year running we were delighted
to partner with Scope as our ‘charity of the
year‘. In addition to the provision of free storage
space we were delighted to work with Scope,
our colleagues, our customers and wider
community on ‘Dash to donate’ week where
bags of donated stock were collected for
Scope charity outlets. This year we collected
1674 bags raising £34,000 which is broadly
similar to last year.
35
—— we have also delivered additional
workshops around objective setting to
support our teams in setting business and
personal objectives which are aligned with
the Space Specialist scorecard. By adopting
this approach we have confidence that all
of our team members’ efforts, within their
individual roles and remits, are driving our
four strategic priority areas; and
We will:
Governance
—— courses fulfilling health and
safety requirements;
—— 61 colleagues progressed their
personal development by achieving
an award as part of our in-house
programme Careerstore.
Governance
Corporate social responsibility continued
“On behalf of over 3,000 homeless guests, 8,700
volunteers and the Crisis at Christmas team, we
would like to thank Safestore for the wonderful
support and services you provided for our Crisis’
wish-list collections and the Hands on London’s
“Wrap-up London” campaign. Your help for
homeless people has never been more important
than it is today. Thank you for giving hope to
the thousands of people who have no home
this Christmas.”
Neil Kennedy
Resources Manager
Crisis at Christmas
Safestore and our community
continued
Crisis
For the third year running we were delighted to
partner with Crisis in support of their Crisis at
Christmas campaign. This provides centres over
the Christmas period offering companionship,
hot meals and warmth together with a range
of essential services for homeless people.
Safestore’s support brought together 43 of
our stores located in Crisis centre catchments
collecting 669 bags and boxes of donated items.
“We are extremely grateful to Safestore for supporting
Wrap Up London 2012. Not only did the generously
donated storage space at three Safestore locations
around London make the storage, sorting and
distribution of thousands of coats possible, but
the help and enthusiasm of all the Safestore team
members at head office and in each of the centres
made a massive contribution to the campaign’s
success. Many thanks to Safestore for helping
Wrap Up London to keep thousands of vulnerable
Londoners warm this winter!”
Elizabeth Grier
CEO and Founder
Hands On London
CSR award
We were delighted to introduce a new CSR
award at our annual conference in celebration
of our regional team’s endeavours supporting
their local communities. This year’s award
went to our Regional team located in the
north of the UK who undertook a charity walk
on Wednesday 4 July climbing Scafell Pike
in the Lake District in support of Cancer
Research. The expedition took five and a
half hours to complete and raised £2,267.
Hands on London
During the year we welcomed a new
charity partner, Hands on London, who are
committed to community based volunteering.
In FY2012 we participated in their Wrap Up
London campaign which encouraged
Londoners to donate a coat to charity. This
year Wrap Up London collected over 10,000
items of clothing and 8,520 coats. Safestore
supported the collection and storage of the
clothing prior to distribution to shelters,
refuges and other charities.
36
John Barnes, Regional Manager for the
Region, collected the award together with his
team and commented that “this initiative not
only raised money for a vital cause but drew
on hidden team resources as people worked
together supporting each other in their goal”.
Local charity support
As part of our working together culture
the year has seen us make many positive
contributions to our local communities.
Overview
As part of our working together culture
the year has seen us make many positive
contributions to our local communities.
These events included:
Our Bristol Ashton Gate team organised
a charity abseil off the side of our 100ft
building in November 2011 which involved
100 members of the local community taking
up the challenge in support of five worthy
charities raising £15,000.
Safestore and our environment
—— consider eco design solutions when
building new stores and as a minimum
always build to BREEAM standard; and
This year we used 317 tonnes of recycled
paper and through the provision of a recycled
box range, cardboard recycling points and a box
for life scheme, we have saved approximately
5,395 trees from being unnecessarily felled.
We are delighted to report that this is an
increase of 80% on the prior year.
Policy statement
Sustainable business practice continues to
be key to our agenda and we remain focused
on delivering a positive net impact on the
environment from our business activities
wherever practical.
When carrying out our business activities
Safestore endeavours to:
—— be sensitive in the use of scare resources,
minimising waste production and promoting
re-use and recycling where possible;
—— communicate our commitment to the
environment throughout our business;
—— continue to deploy cardboard waste
disposal facilities across our estate;
—— ensure the safe handling and disposal
of products;
—— support ethical purchasing by minimising
the environmental impact of the products
we buy and sell;
New store opening – Staines
During the year we opened our Staines
store and through the deployment of air
to air heat source pump technology and
photovoltaic roof tiles we are able to produce
at least 20% renewable energy. In addition,
we have remained focused on the sourcing
of new store materials using recycled and
sustainably sourced materials, such as
chipboard for the mezzanine floors, to
minimise environmental impact.
We consider our environmental
responsibilities to extend beyond our box
range and we continue to look at all aspects
of our packaging range seeking green
alternatives wherever this is commercially
practical. For example, we have replaced all
polythene products with bio-thene products
which together with our bubble wrap
products are all biodegradable.
Our packaging range
We carefully select packaging partners
who share our values and goals to reduce
the unnecessary breakdown of our natural
climate. An example of this is our packaging
supplier (Ecopac) whose operation is 100%
solar powered, operating as part of the
Westcott Venture Park sustainable
energy project.
—— use our communications platform to
promote conservation activities to our
main stakeholders;
—— Actively seek out green energy solutions.
Governance
A charity sky dive organised by Alex Pitman
in our Space Maker Colchester store which
took place in July in support of the Cancer
Recovery Foundation.
Business review
A Christmas toy run supported by
our Eastbourne team together with the
East Sussex Advanced Motorcyclists who
collected toys for over 300 local families.
37
Governance
Principal risks
Risks and risk management
Principal risks
The Group regularly reviews the risks within the Group. Risk management is a dynamic and critical business function as it is important
to help achieve long-term shareholder value and protect our business, people, assets, capital and reputation. It is a fundamental aspect
of the business and is subject to regular and ongoing reviews. We continuously identify and manage those risks and opportunities that
could affect Safestore and the achievement of our business plans and strategic objectives. Our approach is aimed at early identification
of key risks, reducing or removing those risks and/or responding quickly and effectively when a risk crystallises. In each instance, where
possible, we seek to mitigate risks in order to reduce risk to an acceptable level.
For the purposes of Section 417(5)(c) of the Companies Act 2006, the facility agreements with the Group’s bankers and Private
Placement Note holders are the only contracts or arrangements which the Board considers essential to its business.
Managing our risks
The key strategic and operational risks are monitored by the Board and are defined as those which could prevent us from achieving
our business goals. Our current strategic and operational risks and key mitigating actions are as follows:
Risk
Mitigation activities
Strategy
The Group develops business plans
based on a wide range of variables.
Incorrect assumptions about the
self-storage market or changes
in the needs of customers, or the
activities of customers may
adversely affect the returns
achieved by the Group
—— The strategy development process draws on internal and external analysis of the
self-storage market, emerging customer trends and a range of other factors.
—— The portfolio is geographically diversified with regular detailed review of performance.
Finance risk
Lack of funding resulting in inability
to meet business plans, satisfy
liabilities or breach of covenants
—— Funding requirements for business plans are reviewed regularly.
—— The Group manages liquidity in accordance with Board approved policies designed to
ensure that the Group has adequate funds for its ongoing needs.
—— The Board monitors financial covenant ratios and headroom closely.
—— The existing banking facilities run to 30 June 2016 and the US private placement notes
mature in seven and twelve years.
Treasury risk
Adverse currency or interest
rate movements
—— Guidelines set for our exposure to fixed and floating interest rates and use of interest rate
and currency swaps to manage this risk.
—— Foreign currency denominated assets financed by borrowings in the same currency
where appropriate.
38
Overview
Risk
Mitigation activities
Property investment and development
Acquisition and development
of properties that fail to meet
performance expectations
Overexposure to developments
within a short timeframe
—— Thorough due diligence conducted and detailed analysis undertaken prior to Board
approval for property investment and development.
—— The Group’s overall exposure to developments is monitored and projects phased.
—— The performance of individual properties is benchmarked against target returns.
Value of our properties declining
as a result of external market or
internal management factors
Business review
Valuation risk
—— Independent valuations conducted six-monthly by external professionally
qualified valuers.
—— A diversified portfolio let to a large number of customers should help to mitigate any
negative impact arising from changing conditions in the financial and property market.
—— Headroom of loan to value banking covenants is maintained and reviewed.
Occupancy risk
A potential loss of income
and increased vacancy due
to falling demand, oversupply,
or customer default
—— Personal and business customers cover a wide range of segments, sectors
and geographic territories with limited exposure to any single customer.
—— Weekly monitoring of occupancy levels and review of pricing at each individual store.
—— Onsite staff maintains regular contact with customers and local monitoring
of competitor offers.
—— Monitoring of reasons for customers vacating and exit interviews conducted.
Governance
—— The occupancy rate across the portfolio has been maintained through FY2012 due
to flexibility offered on deals by in-house marketing and the customer support centre.
Energy risk
Reductions in energy usage are not
achieved resulting in excessive costs
—— Ongoing upgrading of lighting and heating and review and monitoring
of energy consumption.
—— Full compliance with carbon reduction commitment regulations.
Business organisation and human resources
Failure to recruit and retain key staff
with appropriate skills and calibre
—— Recruitment procedures and the remuneration structure are regularly reviewed
and benchmarked.
—— Succession plans are monitored for all senior positions.
Major events mean that the Group
is unable to carry out its business
for a sustained period
Business interruption risk
—— Business continuity plans in place and tested.
—— Back-up systems at remote places and remote working capabilities.
—— Following the fire at the Paris La Défense store in December 2010, further reviews and
assessments were undertaken for enhancements to supplement the existing compliant
aspects of buildings and processes.
Reputational risk
Failure to meet customer and external
stakeholder expectations
—— Customer surveys undertaken routinely and results acted upon.
—— Training and mystery shopper initiatives undertaken.
—— Regular communication with our stakeholders.
39
Governance
Board of Directors
5
Keith Edelman
Non-Executive Director
4
Alan Lewis
7
Frederic Vecchioli
Executive Director
40
Richard Grainger
Non-Executive Chairman
1
Overview
2
Peter Gowers
Adrian Martin
Senior Independent Director
Business review
Richard Hodsden
6
3
Governance
41
Governance
Board of Directors continued
7
3
5
4
1
2
6
1. Richard Grainger
Richard Grainger joined the Board in
February 2007 as a Non-Executive Director
and was appointed Chairman in March 2008.
He is also currently chairman of Ipes
Guernsey (Holdings) Limited. He started
at Hill Samuel Bank Limited in 1987 and
subsequently joined Close Brothers
Corporate Finance Limited (“CBCF”) in 1996.
In 2001 he was appointed chief executive of
CBCF. He departed from CBCF as chairman
in June 2009. Mr Grainger graduated from
Oxford University and is an associate
member of the Institute of Chartered
Accountants in England and Wales.
5. Keith Edelman
Keith Edelman joined the Group in
September 2009 as a Non-Executive
Director and was appointed Chairman of the
Remuneration Committee in March 2010.
He is currently chairman of Connaught
Bookmakers and NIRAH Holdings Limited,
the senior independent director of
Supergroup Plc and Thorntons,
non‑executive chairman of Beale Plc, and
non-executive director of the Olympic Park
Legacy. Prior to this, he was managing
director of Arsenal Holdings Plc, chief
executive of Storehouse Plc, managing
director of Carlton Communications Plc and
corporate planning director of Ladbroke Plc.
42
Overview
4. Alan Lewis
Peter Gowers joined the Group in
February 2011 and became Chief Executive
on 1 March 2011. Mr Gowers began his
career at Arthur D Little before joining the
strategy group of Bass PLC in 1999. He
joined Bass’s hotel division as head of
strategy in 2001 and became head of global
brand services for InterContinental Hotels
Group plc (“IHG”) in 2003 before being
appointed as IHG’s chief marketing officer
in 2005 and as chief executive, Asia-Pacific in
2007. Mr Gowers has a First Class BA (Hons)
Law Degree from Keble College, University
of Oxford.
Richard Hodsden joined the Group in August
2002 as Chief Financial Officer. He previously
held the position of finance director at Global
Vault plc, Security Printing & Systems Limited
and Lifestyle Upholstery Limited. He was also
financial controller of Flextronics International
Limited and of Parliamentary and Secure
Services, the Stationery Office. Richard
started his career at KPMG, where he
qualified as a chartered accountant in 1991.
Mr Hodsden is a fellow of the Institute
of Chartered Accountants in England
and Wales.
Alan Lewis joined the Group in June 2009
as a Non-Executive Director. He is currently
also non-executive chairman of both
Leeds Bradford International Airport
and Porterbrook as well as chairman
of National Friendly. After five years in
manufacturing with RTZ and Black &
Decker he spent 30 years in the private
equity industry. Firstly with 3i, then from
1991–2011 with Bridgepoint, where he
was a founding partner. Mr Lewis is a
graduate of Liverpool University and holds
an MBA from Manchester Business School.
6. Adrian Martin
7. Frederic Vecchioli
Senior Independent Director
Adrian Martin joined the Group in
September 2008 as a Non-Executive
Director and Chairman of the Audit
Committee. He is also currently non-executive
chairman of Morgan Sindall plc, and a
non-executive director of M&C Saatchi plc
and H R Owen plc. Previously he was a
director of RSM Tenon Group plc, managing
partner at BDO Stoy Hayward, chief executive
at the law firm Reynolds Porter Chamberlain
LLP and was a non-executive director of
Carphone Warehouse Group plc for eight
years until July 2008. Mr Martin is a fellow
of the Institute of Chartered Accountants
in England and Wales.
Executive Director
Frederic Vecchioli joined the Group in 1998
as President and Head of French Operations.
Mr Vecchioli has a Master of Finance from
the University of Paris Dauphine.
Governance
3. Richard Hodsden
Business review
2. Peter Gowers
Key
Remuneration Committee
Audit Committee
Nomination Committee
43
Governance
Executive team
1
44
2
3
4
5
6
Overview
“As an investors in people organisation since
2003 our aim is to be an employer of choice
and we passionately believe that our continual
success is dependent on our highly motivated,
well trained colleagues.”
3. Dave Cox
Company Secretary
Sam Ahmed has worked for the Group since
2004 and was appointed Company Secretary
in May 2008. He was head of corporate
compliance for Mentmore plc and has been
involved in the industry since 1996. Mr Ahmed
qualified as a chartered accountant in 1986
with the Institute of Chartered Accountants
in England and Wales. He worked in public
practice for 15 years, having trained and
qualified with a small London practice, then
as an audit manager at Price Waterhouse,
followed by five years as a general practitioner
with his own accountancy firm in London.
Head of Sales and Marketing
Dave Cox joined Safestore in March 2011
as the Head of Sales and Marketing.
Mr Cox began his career in 1997 working
for Thomson Holidays holding a range
of marketing positions. He then moved to
National Express Group in 2001, becoming
the head of marketing for their trains division
before leaving in 2006 to join AXA Insurance.
He held several positions within AXA including
head of marketing for both their personal lines
insurance and their intermediary partners.
Mr Cox holds a Masters Degree in Marketing.
4. David Davies
5. Hannah Thomson
6. David Penniston
Business Development Director
David Davies joined the Group in 2000
as Head of Operations and was appointed
a Divisional Director after the Mentmore
acquisition. He became Business Development
Director in 2009 and his responsibilities include
the Space Maker management contract.
He is currently the Chairman of the UK
Self-Storage Association. Before joining
Safestore, Mr Davies, who has 35 years’
retail experience across various sectors,
was director of trading at Petsmart UK.
Human Resources Director
Hannah Thomson joined the Group in
May 2012 as HR Director. Mrs Thomson
was formerly with Avis UK, where she was
HR Director for four years. Prior to Avis, she
spent 17 years with the John Lewis Partnership
in a range of senior HR roles, including HR
Manager, Distribution division, Head of the
group HR transformation programme and
Head of HR for the corporate head office.
Mrs Thomson has a 1st class BA in Modern
History and Politics and an MA in History.
She is a Member of the Chartered Institute
of Personnel and Development.
Property Director
David Penniston joined the Group in
March 2008. Mr Penniston was formerly
with Whitbread where he was UK and
Ireland development director having joined
the Whitbread group in 2003 as property
director of David Lloyd Leisure. Prior to that
he was with Waitrose where he was head
of development and previous to that was
with Sainsbury’s for ten years where his
last position was head of property and
development for the hypermarket division.
Mr Penniston is a Member of the Royal
Institution of Chartered Surveyors.
Governance
2. Sam Ahmed
Operations Director, Safestore UK
Andy Brandwood joined the Group
in March 2010 as Operations Director.
He previously held the position of customer
and stores director at Carphone Warehouse
plc. Prior to that Mr Brandwood was divisional
manager at BP Oil plc’s retail division.
Mr Brandwood began his career in Dixons
Stores Group plc where he held a variety
of field-based, head office and trading
roles, from store manager through to
senior operational leadership roles in Dixons,
The Link, Dixons airport retail and Currys.
Business review
1. Andy Brandwood
45
Governance
Directors’ remuneration report
for the year ended 31 October 2012
Remuneration policy report
Introduction from the Chairman of the Remuneration Committee
Dear Shareholder
This report sets out the remuneration policy for the Directors of Safestore Holdings plc
and discloses amounts paid to them over the course of the financial year. In response
to the UK government’s proposed new legislation regarding the reporting of Directors’
remuneration, the Remuneration Committee has agreed to adopt a number of these
changes early (Safestore is not expected to be required to report formally under the
new legislation until 2014). This report has therefore been divided into the following
two sections:
—— Remuneration Policy Report: which includes a forward-looking report detailing
our current remuneration policy and that proposed for FY2013, the possible
value of reward packages under different performance scenarios and details
of Non‑Executive Directors’ remuneration; and
—— Implementation Report: which sets out what has been paid and awarded/vested
in the year under review.
Summary of key decisions in the year
The Remuneration Committee continually reviews the Senior Executive remuneration
policy to ensure it promotes the attraction, motivation and retention of the high quality
Executives who have been key to delivering the Company’s strategy in the past and
who will be key to delivering sustainable earnings growth and shareholder return in the
future. The Committee’s most recent conclusions are that the existing Senior Executive
remuneration policy remains appropriate and should continue to operate for FY2013.
Specifically, the Committee felt that:
—— Executive Director basic salary positioning remains appropriately positioned in the
market. However, to aid administration and ensure that Senior Executive basic salary
increases better reflect increases across the workforce more generally, it was determined
that the Executive Director salary review date should be harmonised with that of the
general workforce. No increases to Executive Director basic salaries will therefore
be awarded with effect from 1 November 2012 and the next review will take place
in May 2013 and annually thereafter. Individuals will not be compensated for the
change in review date;
—— the structure and quantum of the annual bonus work well. Reflecting the Committee’s
robust approach to target-setting, no bonuses were payable in respect of FY2012; and
—— the long-term incentive grant policy, whereby nil-cost awards are granted annually
with vesting based on earnings per share
(two-thirds) and relative total shareholder
return (one-third) performance conditions
and continued service provide a strong
alignment between the Senior Executive
Team and shareholders. Grant levels and
performance targets will continue to be
reviewed in advance of each award and
will reflect changes in market conditions,
particularly following the recent imposition
of 20% value added tax and its impact on
UK pricing opportunities.
In conclusion, the Committee believes
that the remuneration policy continues
to incentivise the delivery of strong yet
sustainable financial results and the
creation of shareholder value.
K G Edelman
Chairman of the
46
Introduction
The Directors’ remuneration report
has been prepared in accordance with
the requirements of Schedule 8 of the
Companies Act 2006, the principles
of the UK Corporate Governance Code
and best practice guidelines. Furthermore,
in response to the UK government’s
proposed legislation regarding the reporting
of Directors’ remuneration and changes to
the voting rights, a number of the revised
reporting requirements have been
incorporated into this year’s report.
Remuneration policy summary
The Board recognises that the Directors’
remuneration is of legitimate concern
to shareholders and is committed to
following current best practice. The Group
operates within a competitive environment;
performance depends on the individual
contributions of the Directors and
employees and the Group believes in
rewarding vision and innovation.
When setting Executive Directors’
remuneration, the Committee endeavours to
ensure that all Directors are provided with
appropriate performance related and
non-performance related pay to encourage
enhanced performance and that they are,
in a fair and responsible manner, rewarded
for their individual contributions to the success
of the Group. The Committee also considers
pay and conditions elsewhere in the Group,
environmental, social and governance
issues and risk when reviewing executive
pay quantum and structure.
The policy of the Board is to provide executive
remuneration packages designed to attract,
motivate and retain Directors of the calibre
necessary to maintain and improve the
Group’s profitability and effectiveness and
to reward them for enhancing shareholder
value and return. To do this, it aims to
provide a market competitive (but not
excessive) package of pay and benefits.
The Group’s general policy is to set basic
salaries around mid-market levels and set
performance pay levels which are at the
upper quartile of market practice but with
stretching goals which accords with the
Group’s general policy of seeking to make
bonuses self-financing wherever possible.
Remuneration packages will also reflect
the Directors’ responsibilities and contain
incentives to deliver the Group’s objectives.
Overview
Summary of remuneration policy for FY2013
Operation
Opportunity
Performance metrics and period
Changes in year
Basic salary
To attract and
retain appropriate
talent
Reflects an
individual’s
responsibilities,
experience and role
Reviewed annually on
1 May
Decisions influenced by:
— responsibilities,
abilities, experience
and performance of an
individual; and
— the Group’s salary
and pay structures
and general workforce
increases
Salaries are benchmarked
periodically against
companies of a similar size
and complexity
—
None
Salary review
date moved from
1 November 2012
to 1 May 2013 to
harmonise with
the rest of the
workforce
Salaries will be
frozen at current
levels until at least
1 May 2013
Annual bonus
Rewards the
achievement of the
corporate strategy
and success of
the Group over
the one-year
operating cycle
Targets reviewed annually
Bonus level is
determined by the
Committee after the year
end, based on performance
against targets
Claw-back provision
operates
Maximum: 100%
of salary
Performance period:
one year
Performance metrics:
EBITDA targets and
personal objectives
EBITDA must be greater
than the previous financial
year for any bonus to
be payable
None
Long Term
Incentive Plan
Incentivises
Directors to
achieve returns for
shareholders over
the long term
Performance Share Plan
(“PSP”) approved by
shareholders in 2009.
Awards of nil-cost or
conditional shares are
made annually with
vesting dependent on
the achievement of
performance conditions
over the subsequent
three years
The Committee reviews
the quantum of awards
annually and monitors
the continuing suitability
of the performance
measures. Claw-back
provision operates
2013 award level:
115% of salary
Normal maximum:
150% of salary
Exceptional
maximum: 200%
of salary
Performance period:
three years
Performance metrics:
— 2/3rds of award: PBT
EPS growth of RPI + 2%
p.a. (25% vests) to RPI
+ 6% p.a. (100% vests),
sliding scale between
the two points; and
— 1/3rd of award: TSR
v FTSE SmallCap
companies, sliding
scale from median (25%
vests) to upper quartile
(100% vests)
Failure to achieve threshold
results in the awards
lapsing; there is no facility
to retest
None
All-employee
sharesave
Encourages longterm shareholding
in the Company
Invitations made
by the Committee
under the Approved
Sharesave scheme
As per HMRC limits
None
None
Share ownership
Further aligns
Executives with
investors
50% of the net of tax
vested PSP shares required
to be retained until the
shareholding guideline
is met
100% of salary
None
None
Benefits
To aid retention and
recruitment
Includes car allowance, life
insurance, private medical
and dental insurance
At cost
None
None
Pension
Aids retention and
rewards sustained
contribution
Defined contribution
arrangements for UK
executives. Social security
contribution for F Vecchioli
Between 15% and
20% of basic salary
None
None
Governance
Purpose/link to strategy
Business review
Element
47
Governance
Directors’ remuneration report continued
Remuneration policy report continued
Reward scenarios
The charts below show how the composition of each of the Executive Directors’ remuneration packages varies at different levels of performance
under the policy set out above, as a percentage of total remuneration opportunity and as a total value:
Total remuneration opportunity
P D Gowers (£)
R D Hodsden (£)
£1,200
€700
£600
34%
£800
€600
34%
27%
£600
30%
19%
14%
£400
£200
66%
Threshold
21%
9%
43%
Target
Long-term share awards
6%
30%
Maximum
Annual cash bonus
27%
£400
£300
£200
£100
£0
34%
€500
30%
21%
19%
15%
10%
66%
42%
Target
Threshold
Benefits and pension
€’000
£500
£’000
£’000
€800
£700
£1,000
£0
F Vecchioli (€)
£800
Salary
30%
€300
7%
30%
Maximum
27%
€400
€200
€100
€0
21%
19%
13%
9%
6%
67%
43%
30%
Threshold
Target
Maximum
Chart labels show proportion of the total package comprised of each element
The key components of the remuneration of the Executive Directors are set out in further detail below.
Detailed remuneration policy
Basic salary
Basic salary is determined by reference to the individual’s experience, performance, responsibility and pay levels across the Group more generally.
In addition, the Committee reviews periodically basic salary levels within similarly sized listed real estate and pan-sector companies although the
Committee is careful not to place excessive reliance on the use of external comparator analysis.
During the year the Remuneration Committee decided to harmonise the Executive Director salary review date with that of the general workforce.
Going forward base salaries will be reviewed on 1 May (previously 1 November). Executive Director salaries will be frozen at current levels for the
first six months of the FY2013 financial year and will not be compensated for the salary review date deferral.
Current basic salary levels for Executive Directors are presented below:
P D Gowers
R D Hodsden
F Vecchioli
Executive Director
From
1 November
2011
From
1 November
2012
£325,000
£216,000
€206,000
£325,000
£216,000
€206,000
Annual bonus
The Committee operated an annual bonus plan for Executive Directors during FY2012. The maximum bonus was set at 100% of basic salary with
measurement based upon sliding scale EBITDA and personal objectives set at the start of each financial year, as set out below:
Measures
Bonus potential
EBITDA
Personal objectives
80%
20%
In addition to the above, EBITDA must be greater than the previous financial year for any bonus to be payable. No bonus has been determined
payable for FY2012.
The FY2013 annual bonus plan for Executive Directors will be similar in design to the plan for FY2012, based on a combination of EBITDA and
personal objectives in the ratio of 80:20 and the requirement to grow absolute EBITDA. The maximum bonus payable will remain at 100% of
basic salary. Specific targets for FY2013 have not been disclosed as they are considered to be commercially sensitive, although the Committee
is satisfied that they will be demanding and require performance significantly better than budget for full payout.
48
Overview
Long-term incentives
The 2009 Performance Share Plan (“PSP”) is the Group’s primary long-term incentive arrangement. The key terms of the PSP are as follows:
—— the PSP has a normal maximum annual limit of 150% of basic salary, with a 200% of basic salary annual limit in exceptional circumstances
(such as recruitment or retention);
—— awards are normally granted in February each year and the normal PSP grant policy is set at 125% of basic salary (although awards were
reduced to 115% of salary from 2011 to reflect the reduction in the profit before tax earnings per share (“PBT-EPS”) growth targets);
—— participants benefit from the value of dividends paid over the vesting period to the extent that awards vest. This benefit is delivered in the
form of cash or additional shares at the time that awards vest;
Business review
—— two-thirds of awards granted in FY2012 are subject to the PBT-EPS condition. 25% of this part of an award vests for PBT-EPS growth of
RPI +2% per annum with full vesting of this part of an award for PBT-EPS growth of RPI +6% per annum. A sliding scale operates between
these points;
—— the remaining one-third of awards granted in 2012 are each subject to a total shareholder return (“TSR”) condition based on the Group’s
performance against other FTSE SmallCap companies (excluding investment trusts) as at the date of grant. 25% of this part of an award
vests if Safestore’s TSR is at a median of the ranking of the TSRs of the comparator group, with full vesting of this part of an award for upper
quartile performance. A sliding scale operates between these points. In addition to the above, no part of the TSR awards will vest unless the
Committee is also satisfied that the TSR performance of the Group is reflective of the Group’s underlying performance; and
—— the Remuneration Committee specifically considered the PBT-EPS growth targets, however given the imposition of VAT on the industry and
the impact thereon to the Company’s performance it is intended that PSP awards granted to Executive Directors in FY2013 will be granted
on the same basis as those in FY2012.
The Remuneration Committee is satisfied that the combination of PBT-EPS and TSR targets provides an appropriate balance between: (i)
incentivising and rewarding strong financial performance; and (ii) providing a strong and direct alignment with the interests of institutional
shareholders by rewarding relative stock market performance.
Claw-back
If at any time following the payment of a bonus or vesting of PSP awards it becomes apparent to the Committee that the calculation of amounts
paid or the calculation of the level of vesting was manifestly inaccurate, the Committee may require an individual to repay such amounts as the
Committee considers to be appropriate to redress any overpayments made.
Sharesave scheme
A Sharesave scheme is open to all employees (including Executive Directors). The Sharesave scheme meets HM Revenue & Customs approval
requirements, thereby giving all eligible employees the opportunity to acquire shares in the Company in a tax efficient manner.
Governance
Shareholding guidelines
Consistent with best practice, the Committee operates shareholding guidelines for Executive Directors at a level equal to 100% of basic salary.
Until such time as this level of shareholding is achieved, 50% of the net of tax value of awards which vest under the PSP will be required to be retained.
Benefits
Taxable benefits include a car allowance, life insurance, private medical and dental insurance. Benefits in kind are not pensionable and are not
taken into account when determining basic salary for performance related remuneration.
Pension
The Committee reviews the pension arrangements for the Executive Directors to ensure that the benefits provided are consistent with those
provided by other similar companies. The Group does not offer a defined benefit pension scheme and instead it makes contributions to an
approved personal pension scheme of the Executive Director’s choice, contributions under compulsory legislative pension arrangements,
or payments to the Director in lieu of pension contributions because of individual circumstances. The Group contributes 15% of basic salary
for the pension arrangements of Peter Gowers and Richard Hodsden and, in line with the compulsory social security contribution requirements
in France, an amount for Frederic Vecchioli which equated to 20% of basic salary for the year ended 31 October 2012.
49
Governance
Remuneration policy report continued
Executive Directors’ service contracts
Executive Director service contracts for Peter Gowers and Richard Hodsden contain a notice period of one year and do not contain contractual
termination payments. The terms on which Frederic Vecchioli is engaged include a six month notice period and a remunerated non-compete
clause on termination. The following table shows details of the service contracts for Executive Directors who held office during the year ended
31 October 2012:
Director
Date of Current Service Contract
P D Gowers
R D Hodsden
F Vecchioli
17 January 2011
9 March 2007
25 September 2006
Notice period
twelve months
twelve months
six months
Outside appointments
The Board allows Executive Directors to accept appropriate outside commercial Non-Executive Director appointments provided the aggregate
commitment is compatible with their duties as Executive Directors. The Executive Directors concerned may retain fees paid for these services,
which will be subject to approval by the Board. No Non-Executive Directorships were held by the Executive Directors during the year.
Non-Executive Directors
The Group’s policy is to appoint Non-Executive Directors to the Board with a breadth of skills and experience that is relevant to the Group’s business.
Appointments are made by the Board upon the recommendations and advice from the Nomination Committee.
Non-Executive Directors receive fixed fees agreed by the Executive Directors after reference to similar roles in an appropriate comparator group
of companies and reimbursement of expenses incurred in attending Board and other meetings. It is the Board’s policy for Non-Executive Directors
to be paid a level of fee that reflects the time commitment and responsibilities of the role and is sufficient to attract individuals with appropriate
knowledge and experience. Non-Executive Directors do not receive an annual bonus but may receive additional remuneration where the time
commitment required due to unusual circumstances exceeds the normal commitments and responsibilities. The Non-Executive Directors
received no other benefits in the year ended 31 October 2012 (FY2011: £nil).
The Non-Executive Directors do not have service contracts but their appointments are subject to review every three years under the rotation
provisions of the Company’s Articles of Association. They all have notice periods of three months.
Performance graph
As the Company is listed in the FTSE SmallCap Index and FTSE Real Estate Investment & Services Sector, the graph sets out a comparison
of the Company’s TSR (i.e. share price movement plus dividends reinvested on the ex-dividend date) against the SmallCap and Real Estate
Investment & Services Sector indexes over the last five years.
Total shareholder return
110
100
90
80
70
Value (£)
60
50
40
30
20
10
0
31 October
2007
Source: Thomson Reuters (Datastream)
31 October
2008
31 October
2009
31 October
2010
FTSE All Share Real Estate Investment & Services Index
31 October
2011
31 October
2012
FTSE SmallCap Index
This graph shows the value, by 31 October 2012, of £100 invested in Safestore Holdings plc over the past five years compared with the value
of £100 invested in the FTSE SmallCap Index and the FTSE All Share Real Estate Investment & Services Index. The other points plotted are
the values at intervening financial year ends.
50
Overview
Implementation report
Role and membership
The Remuneration Committee (the “Committee”) comprised independent Non-Executive Directors and the Group Chairman throughout the year
ended 31 October 2012, namely:
Name
From
To
K G Edelman (Committee Chairman)
R S Grainger
A S Lewis
11 December 2009
1 February 2007
23 March 2011
To date
To date
To date
External advisers
During the year, New Bridge Street (“NBS”), an Aon plc company, was engaged by the Committee to provide it with remuneration consultancy
services. Aon plc provides no other services to the Group. The terms of engagement between the Company and NBS are available from the
Company Secretary on request. NBS is a signatory to the Remuneration Consultants’ Code of Conduct.
Business review
No member of the Committee has any personal financial interest (other than as shareholders), conflicts of interest arising from cross directorships or
day-to-day involvement in running the business. No Director plays a part in any discussion about his own remuneration. The remit of the Committee
is limited to consideration of the remuneration of the Group Chairman (with the Group Chairman absent from such discussions), Executive Directors
and certain members of the Senior Management Team and to approve the long-term incentive awards granted under the schemes operated by
the Group. The Committee’s terms of reference are available on the Group’s website at www.safestore.com.
This part of the remuneration report is audited.
Directors’ remuneration
R S Grainger
A H Martin
A S Lewis
K G Edelman
Total emoluments
Annual
bonus
£’000
Benefits
£’000
Total
2012
£’000
Total
2011
£’000
325
216
168
—
—
—
—
—
22
17
—
—
347
233
168
—
390
342
168
573
90
45
35
45
—
—
—
—
—
—
—
—
90
45
35
45
115
45
33
45
924
—
39
963
1,711
Governance
Executive Directors
P D Gowers
R D Hodsden
F Vecchioli
S W Williams
Salary
and fees
£’000
Notes
No annual bonuses were determined to be payable for FY2012.
Company contributions to the money purchase pension arrangements/payments in lieu of pension contributions for individual Executive Directors
were as follows:
2011
£’000
43
32
—
—
35
32
—
24
75
91
51
P D Gowers
R D Hodsden
F Vecchioli
S W Williams
2012
£’000
Governance
Implementation report continued
Executive Directors’ interests under the PSP are as follows:
Date of grant
Share price
on grant
(p)
As at
1 November
2011
PSP awards
granted
PSP awards
vested
PSP awards
lapsed
As at
31 October
2012
Vesting date
02/02/2011
02/02/2012
142
111
439,791
—
—
336,712
—
—
—
—
439,791
336,712
02/02/2014
02/02/2015
439,791
336,712
—
—
776,503
405,603
183,823
168,586
—
—
—
—
223,784
110,275
—
—
—
295,328
—
—
—
—
183,823
168,586
223,784
758,012
223,784
110,275
295,328
576,193
326,462
141,092
137,747
—
—
—
—
178,597
88,758
—
—
—
237,704
—
—
—
—
141,092
137,747
178,589
605,301
178,597
88,758
237,704
457,428
P D Gowers
R D Hodsden
27/03/2009
24/02/2010
02/02/2011
02/02/2012
55
136
142
111
27/03/2012
24/02/2013
02/02/2014
02/02/2015
F Vecchioli
27/03/2009
24/02/2010
02/02/2011
02/02/2012
55
136
142
111
27/03/2012
24/02/2013
02/02/2014
02/02/2015
The PSP awards are subject to continued service over three years and the following performance targets:
EPS (two-thirds)
TSR (one-third)
2009 and 2010 PSP Awards
25% of this part of an award vests for PBT-EPS
growth of RPI+3% per annum with full vesting of this
part of an award for PBT-EPS growth of RPI+8% per
annum. A sliding scale operates between these points.
2011 and 2012 Awards
25% of this part of an award vests for PBT-EPS
growth of RPI+2% per annum with full vesting of this
part of an award for PBT-EPS growth of RPI+6% per
annum. A sliding scale operates between these points.
25% of this part of an award vests if Safestore’s TSR
is at a median of the comparator group (FTSE SmallCap
excluding investment trusts), with full vesting of this
part of an award for upper quartile performance.
A sliding scale operates between these points. In
addition to the above, no part of the TSR awards will
vest unless the Committee is also satisfied that the
TSR performance of the Group is reflective of the
Group’s underlying performance.
The 2009 PSP award partially vested on 27 June 2012 when the share price was 102 pence per share. The normal vesting date of 27 March 2012
was deferred to 27 June 2012 because of regulatory restrictions arising from the announcement of the Company’s re-financing and interim results.
The EPS performance condition (66.6% of awards) was not met and 23.7% of the TSR performance condition (33.3% of awards) was met.
Sharesave
P D Gowers
R D Hodsden
As at
31 October 2011
Granted/lapsed
during the year
As at
31 October 2012
Exercise price
Exercise period set at grant
8,677
8,677
—
—
8,677
8,677
104.0p
104.0p
1 September 2014 to 28 February 2015
1 September 2014 to 28 February 2015
No consideration was payable in respect of the grant of options under the Sharesave scheme. Options expire at the end of the exercise period
shown in the table above.
The mid-market price of the shares at 31 October 2012 was 109.25 pence and the range during the year was 93.5 pence to 128.0 pence.
52
Overview
Interests in shares
The interests of the Directors in the shares of the Company were:
31 October
2012
Number
31 October
2011
Number
Executive Directors
P D Gowers
R D Hodsden
F Vecchioli
100,000
3,364,988
1,151,331
100,000
3,364,988
1,151,331
100,000
3,364,988
1,151,331
100,833
20,000
200,000
—
100,833
20,000
200,000
—
100,833
20,000
—
—
R S Grainger
A H Martin
A S Lewis
K G Edelman
All Directors’ interests are beneficially held.
Business review
The Company – ordinary shares of 1 pence
29 January
2013
Number
This report was approved by the Remuneration Committee and signed on its behalf by:
K G Edelman
Chairman of the Remuneration Committee
30 January 2013
Governance
53
Governance
Audit Committee report
Members of the Committee
—— Adrian Martin (Chairman)
—— Keith Edelman
Meetings of the Audit Committee are also
attended when appropriate by the Chief
Executive Officer and the Chief Financial
Officer as well as the Group’s external auditors.
The Board has satisfied itself that at least one
member of the Committee has recent and
relevant financial experience and is confident
that the collective experience of Committee
members enables it to be effective.
Principal responsibilities
The Audit Committee’s principal
responsibilities are:
—— to monitor the integrity of the Group’s
financial statements and any other formal
announcements relating to its financial
performance;
—— to keep under review the effectiveness
of the Group’s internal controls and risk
management systems;
—— to make recommendations to the Board in
relation to the appointment of the external
auditors and oversee the relationship with
the external auditors; and
—— monitor the statutory audit of the annual
and consolidated accounts.
The full terms of reference of the Audit
Committee, which comply with the UK
Corporate Governance Code, are available on
the Group’s website at www.safestore.com.
Read more about the UK Corporate
Governance Code on our website at
www.safestore.com
During the year the Audit Committee met
three times, the meetings being attended,
where appropriate, by the Group Chief
Executive Officer, the Group Chief Financial
Officer and the Company Secretary, as well
as the Group’s external auditors.
Number of meetings held
A H Martin (Chairman)
K G Edelman
Audit
Committee
(3 meetings)
3/3
3/3
During the period under review, the Audit
Committee has:
—— assessed the qualifications, expertise
and resources of the external auditors
and their objectivity and independence
and the relationship with the external
auditors as a whole, including the
provision of any non-audit services;
—— assessed the effectiveness of the external
audit process;
—— commissioned an internal audit project and
considered whether it was appropriate to
establish an internal audit function;
—— considered the Group’s procedures by
which employees may, in confidence, raise
concerns about improprieties in matters of
financial reporting or other matters; and
—— reviewed announcements relating to the
Group’s financial performance during
the financial year.
The Audit Committee assesses and reviews
on a regular basis the independence of the
external auditors. In forming their opinion
of the independence and objectivity of the
external auditors, the Audit Committee takes
into account the safeguards operating within
PricewaterhouseCoopers LLP in respect of
any non-audit services provided.
The Audit Committee considers on a
case-by-case basis whether or not the
external audit firm should be permitted
to carry out other services for the Group.
The two key principles applied are: firstly,
whether the provision by the auditors of that
service would compromise their independence
in any material way; and secondly, whether it
would otherwise be inappropriate for them to
be engaged, for example in relation to any
material accounting irregularities or significant
fraud that had previously not been detected
during an audit carried out by that firm.
Where non-audit services are provided,
the fees are based on the work undertaken
and are not success related.
Regard is paid to the nature of, and
remuneration received for, other services
provided by PricewaterhouseCoopers LLP
to the Group and, inter alia, confirmation is
sought from them that the fee payable for
the annual audit is adequate to enable them
to perform their obligations in accordance
with the scope of the audit.
PricewaterhouseCoopers LLP have
been the Company’s auditors since 2003.
The Audit Committee considers that the
relationship with the auditors is working well
and remains satisfied with their effectiveness
and hence has recommended to the Board
that they are proposed for re-appointment.
Accordingly, it has not considered it necessary
to date to require the firm to tender for the
audit work. There are no contractual obligations
restricting the Company’s choice of
external auditors.
In respect of the year ended 31 October 2012,
the auditors’ remuneration comprised £260,000
for audit work and £157,000 for other work,
principally relating to taxation compliance
and advisory services.
This report was approved by the Audit
Committee and signed on its behalf by:
A H Martin
Chairman of the Audit Committee
30 January 2013
54
Nomination Committee report
Overview
At the Committee meeting in December 2011,
a full review was undertaken on the composition
of Board committees. Also, the Committee
considered the composition of the Board,
Non-Executive Directors, executive positions
and succession planning. It was agreed that
each Committee meeting should continue
to give further consideration to the potential
need for and timing for the introduction of a
fourth Non-Executive Director.
Members of the Committee
The Nomination Committee
(“the Committee“) comprises:
—— Richard Grainger (Chairman)
—— Adrian Martin
—— Alan Lewis
—— Peter Gowers
Principal responsibilities
The Nomination Committee’s principal
responsibilities are, amongst other things, to:
—— review the structure, size and composition
of the Board and membership of the
Board’s committees;
The full terms of reference of the Nomination
Committee are available on the Group’s
website at www.safestore.com.
This report was approved by the Nomination
Committee and signed on its behalf by:
Governance
—— consider succession planning for
Executive and Non-Executive Directors
and other Senior Executives;
Business review
The Nomination Committee is appointed
by the Board and comprises the Chairman
of the Board, two Non-Executive Directors
and the Group Chief Executive Officer. The
Chairman does not chair when the Committee
is considering matters relating to his position, in
which circumstances, the Committee is chaired
by an independent Non-Executive Director,
usually the Senior Independent Director.
Gender and diversity is to continue to be
given appropriate consideration when future
candidates are assessed for knowledge,
experience and suitability. During the year,
the Committee considered and approved
the recruitment of the new Human Resources
Director for the UK business. The executive
team in both the UK and France was discussed
along with recruitment planned during the
financial year for strengthening the operational
structure. It was agreed that, as the business
evolves, the management structure would
continue to be reviewed periodically for
adequacy.
R S Grainger
Chairman of the Nomination Committee
30 January 2013
—— make recommendations to the Board
on the appointment of Executive and
Non-Executive Directors; and
—— evaluate the balance of skills, knowledge
and experience of the Board.
During the year under review, the Committee
held four formal meetings. In addition, a number
of informal meetings and discussions took place.
4/4
4/4
4/4
4/4
P D Gowers
R S Grainger
A H Martin
A S Lewis
Nomination
Committee
(4 meetings)
55
Governance
Corporate governance
UK Corporate Governance Code
– Statement of compliance
The Group recognises the importance of, and
is committed to, high standards of corporate
governance. These are set out in the UK
Corporate Governance Code issued by the
Financial Reporting Council in June 2010
(the “Code”). The Board is accountable
to the Company’s shareholders for good
governance and this report describes how
the Board has applied the main principles of
good governance set out in the Code during
the year under review. Throughout the year
the Company has complied with the main
principles of the Code (as they apply to a
smaller company outside the FTSE 350).
The Board
The Code recommends that the Board
should include a balance of Executive and
Non-Executive Directors, such that no
individual or small group of individuals can
dominate the Board’s decision taking. It further
recommends that at least half of the Board,
excluding the Chairman, should comprise
Non-Executive Directors determined by
the Board to be independent and that one
Non-Executive Director should be nominated
as the Senior Independent Director.
The Company currently has seven Directors,
which include the Chairman, three Executive
Directors and three independent Non-Executive
Directors. As a result, the Directors consider
that there is a satisfactory balance of
decision-making power on the Board.
There is a clear division of responsibilities
between the Chairman and Chief Executive
Officer. Adrian Martin, deemed to be
independent upon his appointment in 2008,
is the Senior Independent Director. Keith
Edelman is deemed to be independent.
Alan Lewis was deemed to be independent
from January 2011 following the disposal
by Bridgepoint, a major shareholder in the
Company, of its shareholding in the Company.
The Board recognises the effective
performance and commitment of Richard
Grainger, Peter Gowers and Keith Edelman
and has recommended a resolution for
shareholders to re-appoint each of them
to the Board at the forthcoming AGM.
A clear division of responsibility at the head
of the Group is established, agreed in writing
and approved by the Board. The Chairman is
responsible for the management of the Board
and for aspects of external relations, while the
Chief Executive Officer has overall responsibility
for the management of the Group’s businesses
and implementation of the strategy approved
by the Board.
The statement of the division of responsibilities
between the Chairman and the Chief Executive
Officer is available on the Group’s website at
www.safestore.com.
Appropriate Directors’ and officers’ insurance
cover is arranged by the Group through its
insurance brokers and is reviewed annually.
Composition of the Board
A
B
Board process
The Board normally schedules at least ten
meetings throughout the year, including an
extended strategy review. Additional meetings
are held as and when required.
It has a formal schedule of matters specifically
reserved for its decision, which includes
(amongst other things) the approval of strategic
plans, annual budgets, interim and full year
preliminary results announcements and
internal control and risk analysis.
C
A. Chairman
The Board is aware of the other commitments
of its Directors and is satisfied that these do
not conflict with their duties as Non-Executive
Directors of the Company. The Executive
Directors do not hold any Non-Executive
Directorships in other companies.
B. Executive Directors
1
3
C. Independent 3
56
Board process diagram
Implementation of agreed plans,
budgets and projects in pursuit of the
Group’s strategy and the actual
operation of the Group’s system of
internal control and risk management
are delegated to management.
The Directors are entitled to take
independent legal advice if they
consider it appropriate and, if the
Board is informed in advance, the
cost of the advice will be reimbursed
by the Group.
In the event that a Non-Executive
Director deems it appropriate, upon
resignation, to provide a written
statement to the Chairman, this would
be circulated to the Board.
Board papers are normally issued one
week before Board meetings and the
quality of content is reviewed
continually.
Overview
Attendance at Board and Committee meetings
Board
(10 meetings)
Audit
Committee
(3 meetings)
Nomination
Committee
(4 meetings)
Remuneration
Committee
(3 meetings)
10/10
10/10
10/10
10/10
10/10
10/10
10/10
—
—
—
—
3/3
—
3/3
4/4
—
—
4/4
4/4
4/4
—
—
—
—
3/3
—
3/3
3/3
P D Gowers
R D Hodsden
F Vecchioli
R S Grainger
A H Martin
A S Lewis
K G Edelman
Board papers are normally issued one week
before Board meetings and the quality of
content is reviewed continually. Board minutes
are circulated to all Board members. There is
also regular informal contact between Executive
and Non-Executive Directors to deal with
important matters that arise between scheduled
Board meetings. A separate meeting for
Non-Executive Directors only is held at least
once in every year.
Board committees
The Board has three principal committees,
each of whose terms of reference are available
from the Investor Relations page of the
Group’s website at www.safestore.com.
All committees and all Directors have
the authority to seek information from any
Group Director or employee and to obtain
professional advice.
The Remuneration Committee comprises
Keith Edelman (Chairman), Richard Grainger
and Alan Lewis.
The responsibilities of the
Remuneration Committee are set
out in the Remuneration report on
pages 46 to 53
Nomination Committee
The Nomination Committee comprises
Richard Grainger (Chairman), Adrian Martin,
Alan Lewis and Peter Gowers.
The Nomination Commitee’s report
is set out on page 55
Attendance at Board/committee
meetings
The table above shows the attendance of
individual Directors at Board and committee
meetings that they were eligible to attend
during the year ended 31 October 2012.
Board performance evaluation
During the year, an evaluation of the
performance of the Board, its committees,
the individual Directors and the Chairman
was conducted. The Board and committee
evaluation process was led by the Chairman
with support from the HR Director of the
subsidiary board. Directors completed detailed
written questionnaires covering a number
of key areas including strategy, succession
planning, Board size and composition,
risk management and the relationship
The review also involved an assessment
by the Chairman of individual Directors’
own performance. The Chairman’s own
performance was assessed by the Senior
Independent Director.
The Directors have concluded that, following
this evaluation, the Board and its committees
operate effectively. Recommendations were
made to further enhance the performance
and effectiveness of the Board and a process
of continuous improvement is now being led
by the Chairman.
Board appointments
Every decision to appoint further Directors
to the Board is taken by the entire Board in a
formal meeting based on a recommendation
from the Nomination Committee. The
Nomination Committee consults with
financial and legal advisers and uses the
services of external recruitment specialists.
New members of the Board are provided
with initial and ongoing training appropriate
to individual needs in respect of their role
and duties as Directors of a listed plc.
The service agreements of the Executive
Directors and the letters of appointment
of the Non-Executive Directors are available
for inspection at the registered office of the
Company during normal business hours,
including the 15 minutes immediately prior
to the AGM. The letters of appointment for
Non-Executive Directors are in line with the
provisions of the UK Corporate Governance
Code relating to expected time commitment.
57
Get the terms of reference at
www.safestore.com/investors
Read the Audit Committee’s
report on page 54
between the Board and management.
The results of the reviews were then
considered by the Chairman and discussed
by the Board as a whole.
Governance
The services of the Company Secretary
are available to all members of the Board.
The Directors are entitled to take independent
legal advice if they consider it appropriate and,
if the Board is informed in advance, the cost
of the advice will be reimbursed by the Group.
In the event that a Non-Executive Director
deems it appropriate, upon resignation, to
provide a written statement to the Chairman,
this would be circulated to the Board.
Audit Committee
The Audit Committee comprises Adrian
Martin (Chairman) and Keith Edelman.
Business review
Implementation of agreed plans, budgets
and projects in pursuit of the Group’s strategy
and the actual operation of the Group’s system
of internal control and risk management are
delegated to management.
Governance
Corporate governance continued
Re-election of Directors
Risk management
The Company’s Articles of Association provide
that one-third of the Directors retire by rotation
each year and that each Director will seek
re-election by the shareholders at the AGM
at least once every three years. Additionally,
new Directors are subject to election by
shareholders at the first opportunity after
their appointment. Details of the Directors
seeking re-election at the 2013 AGM are
given in the Notice of Annual General Meeting.
The Directors are responsible for the
Group’s system of operational control and
risk management. During the year the Group
undertook regular quarterly reviews of the
formal risk management assessment. Risk
management remains an ongoing programme
within the Group and is formally considered
at regular operational meetings as well as
meetings of the Board. This process accords
with the Turnbull guidance.
Relations with shareholders
Read our risk management
report on pages 38 to 39
The Group places a great deal of importance
on communication with its shareholders
and maintains a dialogue with them through
investor relations programmes. These include
formal presentations of the full year and interim
results and meetings with institutional investors
and analysts as required. To ensure all Board
members share a good understanding of the
views of major shareholders about the Group,
there is a formal process whereby the Board
reviews announcements and reports prior
to public distribution and are sent summaries
of institutional investor comment following
meetings on the full year and interim results.
The Non-Executive Directors are available to
meet major shareholders when requested.
During the latter part of FY2012, the Board
engaged a capital markets advisory firm
specialising in investor relations to consult
with institutional shareholders and analysts.
In December 2012, the Board was provided
with a briefing on the feedback received
and this will be reported further in the
Annual Report for FY2013.
The Board considers the Annual Report
and financial statements and the AGM to be
the primary vehicles for communication with
private investors. Resolutions are proposed
on each substantially separate issue and the
Company indicates the level of proxy voting
lodged in respect of each. The AGM gives all
shareholders who are able to attend (especially
private shareholders) the opportunity to hear
about the general development of the business.
It also provides an opportunity for shareholders
to ask questions of the full Board of Directors,
including the Chairmen of the Audit, Nomination
and Remuneration Committees.
58
Internal control
The UK Corporate Governance Code requires
that at least annually Directors review the
effectiveness of the Group’s system of
material internal controls including financial,
operational and compliance controls and risk
management systems. The Board confirms
that it carried out a review of the effectiveness
of the system of internal control which
operated within the Group during the financial
year in accordance with the UK Corporate
Governance Code. The Board places
considerable importance on maintaining a
strong control environment but recognises
that such systems are designed to manage
rather than eliminate risk, providing
reasonable but not absolute assurance
against material misstatement or loss.
Key features of the Group’s systems of
internal control include:
—— an annual strategy review process to ensure
that the Group’s resources are prioritised
to deliver optimum shareholder returns;
—— a comprehensive system of reporting
monthly, half yearly and annual financial
results to the Directors and key groups
of senior management, focusing on
key initiatives reviewing performance
and implementing remedial action
where necessary;
—— a robust and detailed process to develop
the Group’s annual budget and regular
revised forecasts;
—— monthly Group management accounts
to report performance as compared to
budget and/or forecast as appropriate;
—— a management structure with clearly
defined authority limits; and
—— development and frequent reporting
of relevant Key Performance Indicators
to monitor operational progress.
The Directors believe that the system of internal
control is appropriate for the Group. The Group
currently employs a risk manager supported
by two store auditors who are responsible for
reviewing operational and financial control at
store level. The risk manager reports to the
Chief Executive Officer and Chief Financial
Officer. The Group does not have a separate
internal audit function although the Board
periodically reviews the need for establishing
one in addition to the existing store assurance
team. An externally facilitated internal audit
programme was commissioned for certain
specific aspects of financial controls based
on the recommendations of the Audit
Committee. Upon completion of this project,
the Audit Committee reviewed the findings to
determine a rolling programme of work to be
commissioned periodically until a separate
internal audit function is deemed necessary.
A summary of the principal risks and
uncertainties within the business are
set out on pages 38 to 39
Directors’ report
Overview
The Directors present their Annual Report and
the audited Consolidated financial statements
for the year ended 31 October 2012.
Key Performance Indicators
Safestore Holdings plc is a public limited
company incorporated in Great Britain under
the Companies Act 2006. The address of the
registered office is Brittanic House, Stirling
Way, Borehamwood, Hertfordshire WD6 2BT,
United Kingdom.
The Directors are required to comment upon
the Group’s Key Performance Indicators.
These are reported within the Financial
review on pages 20 to 25 and in the Chief
Executive Officer’s review on page 26 to 31
for customer enquiries, new lets, vacates,
length of stay and other non-financial Key
Performance Indicators.
Principal activities
Results and dividends
Business review
The information that fulfils the requirements
of the Business review can be found in the
following sections, which are incorporated
into this report by reference:
—— the Financial review can be found on
pages 26 to 31;
—— the principal risks and uncertainties
within the business are set out in the risk
management section on pages 38 to 39
including an assessment of the requirements
of Section 417(5)(c) of the Companies Act
2006 on information about persons with
whom the Group has contractual or other
arrangements which are essential to the
business of the Group;
—— the Corporate governance review can be
found on pages 56 to 58.
Further information on the Group’s operations
and financial affairs that are in addition to the
requirements of the Business review are set
out on pages 1 to 67 of this report.
Details of the Directors who served during
the year and to the date of approval of the
financial statements are set out below:
R S Grainger
P D Gowers
R D Hodsden
F Vecchioli
Executive Director
Biographical details of the Directors are set
out on pages 42 to 43.
Details of the interests of the Directors in
the shares of the Company are set out in
the Remuneration report on page 53. No
changes took place in the interests of the
Directors between 31 October 2012 and
30 January 2013.
The Company’s Articles of Association
provide that a Director may be appointed
by an ordinary resolution of the shareholders
or by the existing Directors, either to fill a vacancy
or as an additional Director. Further information
on the Company’s internal procedures for
the appointment of Directors is given in the
Corporate governance section on pages 56
to 58.
The Company’s Articles of Association
require that one-third of Directors retire by
rotation each year and that each Director
must retire at intervals of not more than three
years. Non-Executive Directors must retire
The issued share capital of the Company
as at 31 October 2012 was £1.88 million
divided into 188.1 million ordinary shares
of 1 pence each.
The rights and obligations attaching to the
Company’s shares, as well as the powers
of the Company’s Directors, are set out in the
Company’s Articles of Association, a copy
of which can be viewed on the Company’s
website at www.safestore.com.
The Company’s Articles of Association can
only be amended by special resolution of
the shareholders.
There is no restriction on the transfer or
limitations on the holding of the Company’s
shares and there is no requirement for prior
approval of a transfer. Under the Company’s
Articles of Association, the Directors have the
power to suspend voting rights and the right
to receive dividends in respect of shares where
the holder of the shares fails to comply with
a notice issued under Section 793 of the
Companies Act 2006.
Change of control
The Group is not party to any significant
agreement that takes effect, alters or
terminates upon a change of control of the
Group following a takeover bid. The Group’s
employee share schemes contain provisions
relating to a change of control. Outstanding
options and awards normally vest and
become exercisable on a change of control,
subject to the satisfaction of any performance
conditions at that time.
59
—— the Group’s CR commitment and
information in respect of environmental
matters, employees and social and
community issues can be found on
pages 32 to 37; and
Share capital
Directors
A H Martin
A S Lewis
K G Edelman
The Directors have (and during the year
ended 31 October 2012 had) the benefit of
the qualifying third party indemnity provision
contained in the Company’s Articles of
Association which provides a limited indemnity
in respect of liabilities incurred as a Director
or other officer of the Company.
Governance
—— the Chairman’s statement and the
Chief Executive Officer’s review on pages
16 to 25 contain a review of the business
of the Group, the development and
performance of the Group during the
year and at the year end and of its strategy
and prospects, including an analysis using
Key Performance Indicators;
The results for the year are set out on page 63.
The Directors recommend a final dividend
of 3.80 pence per ordinary share (FY2011:
3.55 pence) totalling £7,125,000 (FY2011:
£6,656,000) to be paid on 12 April 2013
to shareholders whose names appear on
the register at the close of business on
15 March 2013. An interim dividend of
1.85 pence was paid in the year (FY2011:
1.75 pence) totalling £3,495,000
(FY2011: £3,280,000).
The Board, which is responsible for the
management of the business, may exercise
all the powers of the Company subject to
the provisions of relevant legislation and the
Company’s Memorandum and Articles of
Association. The powers of the Directors set
out in the Articles of Association include those
in relation to the issue and buyback of shares.
Business review
The Group provides individual, secure
self-storage space and related services
for business and personal customers in the
UK and France. The majority of revenue is
generated from the provision of self-storage.
However, ancillary products, including
insurance and storage accessories, e.g.
bubble wrap, boxes and padlocks, provide
an additional revenue stream.
annually once they have been in office for a
period of more than eight years. In accordance
with these provisions, Richard Grainger,
Keith Edelman and Peter Gowers will retire
at the forthcoming AGM and, being eligible,
offer themselves for re-election.
Governance
Directors’ report continued
Substantial shareholdings
The following substantial shareholdings have been notified to the Company:
At 10 January 2013
Aberforth Partners LLP
CBRE Global Investors
BNP Paribas Investment Partners
APG Investments
Morgan Stanley Investment Management
Legal & General Investment
Schroder Investment Management
S W Williams
Henderson Global Investors
Own shares –
Employee Benefit Trust
Political and charitable
contributions
On 31 January 2008, the Company allotted
1,051,755 ordinary shares of 1 pence each
at par to the Safestore Employee Benefit Trust
in satisfaction of awards under the Group’s
Long Term Incentive Plan. The Employee
Benefit Trust retains 639,740 ordinary shares
(FY2011: 639,740 ordinary shares) with a cost
of £6,397 (FY2011: £6,397). This represents
0.34% (FY2011: 0.34%) of the total issued
share capital of the Company.
The Group made no political or charitable
donations during the year (FY2011: £nil).
The CR report provides details of the Group’s
“Charity Room in Every Store” commitment.
Financial risk management
Information on risk management is provided
on pages 38 to 39.
Employees
The Group places great value in its employees
and their involvement in the business. The
Group recognises the importance of good
communication with its staff and has designed
internal communications channels to ensure
that all employees are well informed about the
business of the Group. The Group considers
the views of employees in its decisions. The
Group aims to achieve a common awareness
of financial and economic factors that affect
the performance of the Group. These include
training and staff briefings. It is Group policy
to give equal opportunity of employment
to disabled and able persons according to
their suitability to perform the work required.
The services of existing employees who are or
who become disabled are retained wherever
practicable and the Group is committed to
applying the provisions of the Disability
Discrimination Act 1995.
Employee incentive arrangements are normally
reviewed on an annual basis. Annual bonus
payments are triggered on the satisfactory
achievement of pre-agreed personal objectives
and the financial performance of the business.
60
Creditor payment policy
The Company is a holding company with
very few suppliers. The Group aims to pay
all its suppliers within the payment terms
negotiated with each individual supplier.
The Group had 48 days’ purchases
(FY2011: 45 days’ purchases) outstanding
at 31 October 2012, based on the average
daily amount invoiced by suppliers during
the year ended 31 October 2012.
Going concern
After making enquiries, taking into account
current borrowing facilities and trading
prospects, the Directors have a reasonable
expectation that the Group has adequate
resources to continue in operational existence
for the foreseeable future. In May 2012, new
banking facilities were agreed for Sterling
and Euro borrowings of £328 million and
£72 million of US private placement notes
were issued. The re-financed bank facilities
run to June 2016 and the secured notes
mature in 2019 and 2024. For this reason,
the going concern basis has been adopted
in preparing the financial statements.
Post-balance sheet events
There are no reportable events after the
balance sheet date.
Registered company number
4726380
Disclosure of information
to auditors
In the case of each of the persons who
are Directors at the time when the report
is approved under Section 418 of the
Companies Act 2006 the following applies:
Number
%
13,384,455
12,697,347
12,197,532
11,079,425
10,954,696
10,426,089
9,704,897
6,927,579
6,350,551
7.11
6.75
6.48
5.89
5.82
5.54
5.16
3.68
3.38
—— so far as the Director is aware, there is
no relevant audit information of which the
Company’s auditors are unaware; and
—— the Director has taken all the steps that
he ought to have taken as a Director in
order to make himself aware of any
relevant audit information and to establish
that the Company’s auditors are aware
of that information.
Independent auditors
A resolution to re-appoint
PricewaterhouseCoopers LLP as auditors
to the Company will be proposed at the
forthcoming AGM.
Annual General Meeting
The AGM will be held at the Company’s
registered office at Brittanic House, Stirling
Way, Borehamwood, Hertfordshire WD6 2BT
on 20 March 2013 at 12.00, noon.
Shareholders are encouraged to use their
vote at this year’s AGM either by attending
the meeting in person or by completing and
returning the enclosed Form of Proxy in
accordance with the instructions set out in
the form. Completing and returning the Form
of Proxy will not prevent shareholders from
attending and voting at the meeting.
The Notice of Annual General Meeting
on pages 102 to 106 sets out details of the
business to be considered at the AGM and
contains explanatory notes on such business.
By order of the Board:
S Ahmed
Company Secretary
30 January 2013
Statement of Directors’ responsibilities
Overview
The Directors are responsible for preparing
the Annual Report, the Directors’ remuneration
report and the financial statements in
accordance with applicable law and regulations.
—— select suitable accounting policies and
then apply them consistently;
—— make judgements and accounting
estimates that are reasonable and prudent;
—— prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for the
maintenance and integrity of the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of financial statements may differ from
legislation in other jurisdictions.
Each of the Directors, whose names and
functions are listed in the Directors’ report,
confirm that, to the best of their knowledge:
—— the Group financial statements, which
have been prepared in accordance with
IFRS as adopted by the European Union,
give a true and fair view of the assets,
liabilities, financial position and loss of
the Group; and
Governance
—— state whether IFRS as adopted by the
European Union and applicable UK
Accounting Standards have been followed,
subject to any material departures disclosed
and explained in the Group and parent
company financial statements
respectively; and
Business review
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law, the Directors have prepared
the Group financial statements in accordance
with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union
and the parent company financial statements
in accordance with United Kingdom Generally
Accepted Accounting Practice (UK Accounting
Standards and applicable law). Under company
law the Directors must not approve the
financial statements unless they are satisfied
that they give a true and fair view of the state
of affairs of the Group and the Company and
of the profit or loss of the Group for that period.
In preparing these financial statements, the
Directors are required to:
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and the Group and enable
them to ensure that the financial statements
and the Directors’ remuneration report
comply with the Companies Act 2006 and,
as regards the Group financial statements,
Article 4 of the IAS Regulations. They are also
responsible for safeguarding the assets of
the Company and the Group and hence for
taking reasonable steps for the prevention
and detection of fraud and other irregularities.
—— the Directors’ report includes a fair review
of the development and performance of the
business and the position of the Group,
together with a description of the principal
risks and uncertainties that it faces.
By order of the Board:
S Ahmed
Company Secretary
30 January 2013
61
Independent auditors’ report
to the members of Safestore Holdings plc
We have audited the Group financial statements of Safestore Holdings plc for the year ended 31 October 2012 which comprise the Consolidated
income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of changes
in shareholders’ equity, the Consolidated cash flow statement and the related notes. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ responsibilities set out on page 61, the Directors are responsible for the preparation of the Group
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware
of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
—— give a true and fair view of the state of the Group’s affairs as at 31 October 2012 and of its loss and cash flows for the year then ended;
—— have been properly prepared in accordance with IFRS as adopted by the European Union; and
—— have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the lAS Regulation.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion:
—— the information given in the Directors’ report for the financial year for which the Group financial statements are prepared is consistent with the
Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
—— certain disclosures of Directors’ remuneration specified by law are not made; or
—— we have not received all the information and explanations we require for our audit; or
—— a Corporate governance statement has not been prepared by the parent company.
Under the Listing Rules we are required to review:
—— the Directors’ statement, set out on page 60, in relation to going concern;
—— the part of the Corporate governance statement relating to the Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
—— certain elements of the report to shareholders by the Board on Directors’ remuneration.
Other matter
We have reported separately on the parent company financial statements of Safestore Holdings plc for the year ended 31 October 2012 and on the
information in the Directors’ remuneration report that is described as having been audited.
Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Birmingham
30 January 2013
62
Consolidated income statement
Overview
Group
Notes
Revenue
Cost of sales
2012
£’000
2011
£’000
95,060
(31,222)
64,171
(9,818)
63,838
(15,476)
50,297
4,875
384
(1,203)
50,512
(1,332)
(8)
(810)
54,353
48,362
Loss on investment property before exceptional item
Impairment of investment property – exceptional
(37,536)
—
(16,187)
(2,230)
Gross profit
Administrative expenses
EBITDA before exceptional items, change in fair value of derivatives, loss on investment
properties and contingent rent
Exceptional items
Change in fair value of derivatives
Depreciation and contingent rent
5
11
(37,536)
(18,417)
Operating profit
3,6
16,817
29,945
43
—
212
1,825
43
2,037
(24,549)
(9,969)
(1,805)
(23,435)
—
—
(36,323)
(23,435)
(19,463)
8,547
11,670
4,481
(7,793)
13,028
(4.16)
(4.16)
6.95
6.92
Finance income before change in fair value of derivatives
Total finance income
4
Finance expense before exceptional items and change in fair value of derivatives
Exceptional finance expenses
Total finance expense
4
(Loss)/profit before income tax
Income tax credit1
8
Earnings per share for (loss)/profit attributable to the equity holders
– basic (pence)
– diluted (pence)
10
10
Governance
Total loss on investment properties
Business review
98,836
(34,665)
3
1 Includes an exceptional credit of £6,308,000 (FY2011: £6,597,000) (see note 8).
The financial results for both years relate to continuing activities.
The notes on pages 68 to 95 are an integral part of these Consolidated financial statements.
63
Consolidated statement of comprehensive income
Group
2012
£’000
2011
£’000
Other comprehensive income:
Cash flow hedges
Recycling of hedge reserve
Currency translation differences
Tax on items taken to other comprehensive income
(7,793)
13,028
(4,327)
1,492
(12,283)
1,074
—
—
1,100
—
Total other comprehensive (expenditure)/income, net of tax
(14,044)
1,100
Total comprehensive (expenditure)/income for the year
(21,837)
14,128
64
Consolidated balance sheet
Overview
as at 31 October 2012
Group
2011
£’000
685,143
57,990
5,400
3,746
7,084
6,000
—
713,564
62,534
15,059
2,856
7,031
—
78
765,363
801,122
207
17,586
3,002
6,897
242
17,018
6
27,692
31,940
793,055
833,062
—
(2,574)
(32,280)
(9,598)
(10,143)
(92)
(35,048)
(10,040)
(44,452)
(55,323)
(343,117)
(12,868)
—
(100,841)
(48,392)
(326,883)
(6,164)
(529)
(116,510)
(505,218)
(502,580)
Total liabilities
(549,670)
(557,903)
Net assets
243,385
275,159
24
23,24
1,881
28,349
(2,229)
215,384
1,881
28,349
11,815
233,114
24
243,385
275,159
Notes
Assets
Non-current assets
Investment properties
Interests in leasehold properties
Investment properties under construction
Property, plant and equipment
Deferred income tax assets
Other receivables
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
11
11
11
12
21
19
14
15
19
16
Total assets
Non-current liabilities
Financial liabilities
– bank borrowings
– derivative financial instruments
Trade and other payables
Deferred income tax liabilities
Obligations under finance leases
18
19
17
21
20
22
Total equity
(52,494)
These financial statements on pages 63 to 95 were authorised for issue by the Board of Directors on 30 January 2013 and signed on its behalf by:
R D Hodsden
P D Gowers
Company registration number: 4726380
65
Equity
Ordinary shares
Share premium
Other reserves
Retained earnings
18
19
17
20
14,674
Governance
Current liabilities
Financial liabilities
– bank borrowings
– derivative financial instruments
Obligations under finance leases
Business review
2012
£’000
Consolidated statement of changes in shareholders’ equity
Group
Share
capital
£’000
Share
premium
£’000
Translation
reserve
£’000
Hedge
reserve
£’000
Retained
earnings
£’000
Total
£’000
1,881
28,349
10,715
—
229,244
270,189
—
—
—
—
13,028
13,028
—
—
1,100
—
—
1,100
Total other comprehensive income
—
—
1,100
—
—
1,100
Total comprehensive income
—
—
1,100
—
13,028
14,128
Transactions with owners
Dividends (note 9)
Employee share options
—
—
—
—
—
—
—
—
(9,375)
217
(9,375)
—
—
—
—
(9,158)
(9,158)
1,881
28,349
11,815
—
233,114
275,159
—
—
—
—
(7,793)
(7,793)
—
—
(12,283)
—
—
(12,283)
—
—
—
—
—
—
(4,327)
1,492
—
—
(4,327)
1,492
—
—
—
1,074
—
1,074
Total other comprehensive income
—
—
(12,283)
(1,761)
—
(14,044)
Total comprehensive income
—
—
(12,283)
(1,761)
(7,793)
(21,837)
Dividends (note 9)
—
—
—
—
—
—
—
—
(10,125)
188
(10,125)
—
—
—
—
(9,937)
(9,937)
1,881
28,349
(468)
(1,761)
215,384
243,385
Balance at 1 November 2010
Comprehensive income
Profit for the year
Other comprehensive income
Exchange differences on translation
of foreign operations
Comprehensive income
Loss for the year
Other comprehensive income
Change in fair value
of hedged instruments
Tax on items taken to other
comprehensive income
Balance at 31 October 2012
66
217
188
Consolidated cash flow statement
Overview
Group
Notes
Cash flows from operating activities
Cash generated from operations
Interest paid
Interest received
Tax paid
2012
£’000
2011
£’000
46,789
(21,528)
404
(16)
Net cash inflow from operating activities
30,457
25,649
Cash flows from investing activities
Expenditure on investment properties and development properties
Purchase of property, plant and equipment
(20,162)
(1,336)
(35,037)
(21,498)
(36,649)
(10,125)
357,227
(7,703)
(4,336)
(351,172)
(9,375)
25,000
—
(5,518)
Net cash (outflow)/inflow from financing activities
(16,109)
10,107
Net decrease in cash and cash equivalents
Exchange (loss)/gains on cash and cash equivalents
Cash and cash equivalents at 1 November
(7,150)
(627)
14,674
(893)
86
15,481
6,897
14,674
Cash flows from financing activities
Equity dividends paid
Net proceeds from issue of new borrowings
Debt issue costs
Finance lease principal payments
Repayment of borrowings
Cash and cash equivalents at 31 October
9
16,26
(1,612)
Business review
51,666
(20,560)
125
(774)
25
—
Governance
67
Notes to the financial statements
1. General information
Safestore Holdings plc (“the Company”) and its subsidiaries (together, “the Group”) provide self-storage facilities to customers throughout the UK
and Paris. The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK.
The address of its registered office is Brittanic House, Stirling Way, Borehamwood, Hertfordshire WD6 2BT.
2. Summary of significant accounting policies
The principal accounting policies of the Group are set out below. These policies have been consistently applied to each of the years presented,
unless otherwise stated.
Basis of preparation
The Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted
by the European Union and International Financial Report Interpretations Committee (“IFRIC”) interpretations and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared on a going concern basis under the historical cost convention as modified by the revaluation
of investment properties and the fair value of derivative financial instruments.
The Directors of Safestore are confident that, on the basis of current financial projections and facilities available and after considering sensitivities,
the Group has sufficient resources for its operational needs and to enable the Group to remain in compliance with the financial covenants in its
bank facilities for at least the next twelve months.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual amounts may
differ from those estimates.
Key judgements include the estimation of fair values of investment properties and recognition of deferred tax assets.
Standards, amendments to standards and interpretations issued and applied
The following accounting standards, amendments and interpretations issued by IASB and IFRIC are effective for the Group’s accounting
period beginning on or after 1 November 2011 but had no material effect on the results or financial position of the Group disclosed in these
financial statements:
—— IAS 24 (revised), ‘Related party disclosures’ (effective 1 January 2011)
—— Annual improvements (2010) effective 1 January 2011
—— Amendment to IFRS 7, ‘Financial instruments: Disclosures’ (effective 1 July 2011)
—— Amendment to IFRS 1, ‘First time adoption’, on hyperinflation and fixed dates (effective 1 July 2011, endorsed 1 January 2013)
—— Amendment to IFRIC 14, ‘Prepayments of a Minimum Funding Requirement’ (effective January 2011)
The following new standards and interpretations have been issued but are not effective for the year ended 31 October 2012 and have not
been adopted early:
—— IFRS 9, ‘Financial instruments’ (effective 1 January 2015)
—— IFRS 10, ‘Consolidated financial statements’ (effective 1 January 2013, endorsed 1 January 2014)
—— IFRS 11, ‘Joint arrangements’ (effective 1 January 2013) (endorsed 1 January 2014)
—— IFRS 12, ‘Disclosures of interests in other entities’ (effective 1 January 2013, endorsed 1 January 2014)
—— IFRS 13, ‘Fair value measurement’ (effective 1 January 2013)
—— IAS 19 (revised 2011), ‘Employee benefits’ (effective 1 January 2013)
—— IAS 27 (revised 2011), ‘Separate financial statements’ (effective 1 January 2013, endorsed 1 January 2014)
—— IAS 28 (revised 2011), ‘Associates and joint ventures’ (effective 1 January 2013, endorsed 1 January 2014)
—— Amendment to IAS 12, ‘Income taxes’ on deferred tax (effective 1 January 2012)
—— Amendment to IAS 1, ‘Presentation of financial statements’ on OCI (effective 1 July 2012)
—— Amendment to IFRS 1, ‘First time adoption’ on government grants (effective 1 January 2013)
—— Amendments to IFRS 7 on financial instruments asset and liability offsetting (effective 1 January 2013)
—— Annual improvements 2011 (effective 1 January 2013)
—— Amendments to IFRS 10, 11 and 12 on transition guidance (effective 1 January 2013)
—— Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities (effective 1 January 2014)
—— Amendments to IAS 32 on financial instruments asset and liability offsetting (effective 1 January 2014)
—— IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ (effective 1 January 2013)
The Group is assessing the likely effect of these new and amended standards on its future financial statements.
68
Overview
2. Summary of significant accounting policies continued
Basis of consolidation
The Consolidated financial statements incorporate the financial statements of the Company and all its subsidiary undertakings made up to
31 October each year. Subsidiaries are entities where the Company has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
The results of subsidiaries acquired or disposed of during the year are included in the Consolidated income statement from the effective date
of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those
used by the Group.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s
interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination,
the excess is recognised immediately in the income statement.
Business review
All intra-group transactions, balances and unrealised gains on transactions are eliminated on consolidation. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the assets transferred.
Segmental reporting
The Group’s operations are located in the UK and France. The Group’s net assets, revenue and profit before tax are attributable to one principal
activity, the provision of self-storage. The primary segment is based on geographical location.
Segment results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis.
Unallocated items principally comprise interest-bearing loans and deferred taxation.
Revenue recognition
Revenue represents amounts derived from the provision of self-storage services (rental space, customer goods insurance and consumables) which
fall within the Group’s activities provided in the normal course of business, net of discounts, VAT (where applicable) and other sales related taxes.
Rental income is recognised over the period for which the space is occupied by the customer and on a time apportionment basis. No revenue
is recognised if there are significant uncertainties regarding recovery of the consideration due. Insurance income is recognised over the period
for which the space is occupied by the customer and on a time apportionment basis.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Governance
The portion of insurance premiums on occupied space that relates to unexpired risks at the balance sheet date is reported as unearned premium
liability in other payables. Income earned on the sales of consumable items is recognised at the point of sale.
Income for the sale of assets is recognised when the significant risks and returns have been transferred to the buyer. For property sales this is
at the point of completion. Where any aspect of consideration is conditional then the revenue associated with that conditional item is deferred.
Income from insurance claims is recognised when it is virtually certain of being received. Normally this is when a contractual agreement has
been reached.
Exceptional items
Where it is considered that items of income or expense are material and are considered “one off” in nature, their nature and amount is disclosed
separately on the face of the income statement where this enhances the understanding of the Group’s financial performance.
Transactions and balances
Foreign currency transactions in currencies other than Sterling are translated into the functional currency at the rates of exchange prevailing
on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation
are included in the income statement for the period, except for exchange differences arising on non-monetary assets and liabilities where the
changes in fair value are recognised directly in equity.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are classified as equity and
are recognised as a separate component of equity (cumulative translation adjustment). Such translation differences are recognised as income or
as expenses in the period in which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated
at the closing rate.
69
Foreign currency translation
Functional and presentation currency
The individual financial statements for each company are measured using the currency of the primary economic environment in which it operates
(its functional currency). For the purposes of the Consolidated financial statements, the results and financial position of the Group are expressed
in Sterling, which is the presentational currency of the Group.
Notes to the financial statements continued
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are included within the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their
expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Investment properties, investment properties under construction and interests in leasehold properties
Investment properties are those properties owned by the Group that are held to earn rental income. Investment properties are initially measured
at cost, including related transaction costs and borrowing costs. Borrowing costs are incurred for the purpose of acquiring, constructing or producing
a qualifying investment property and are capitalised as part of its cost. Borrowing costs are capitalised while acquisition or construction is actively
underway and cease once the asset is substantially complete, or suspended if the development of the asset is suspended. After initial recognition,
investment properties are held at fair value based on a market valuation by professionally qualified external valuers at each balance sheet date.
The fair value of investment properties reflects, among other things, rental income from current leases and assumptions about rental income from
future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in
respect of the property. Some of these outflows are recognised as a liability, including finance lease liabilities in respect of leasehold land classified
as investment properties; others, including contingent rent payments, are not recognised in the balance sheet.
For investment properties held under leases that are classified as finance leases, the properties are recognised at the lower of fair value of the
property and the present value of the minimum lease payments. An equivalent amount is recognised as a finance lease liability. After initial recognition,
leasehold properties classified as investment properties are held at fair value. If a valuation obtained for a property held under a lease is net of all
payments expected to be made, any related lease liability recognised separately in the balance sheet is added back to arrive at the carrying value
of the investment property for accounting purposes. Depreciation is provided on the minimum lease payment valuation over the lease term.
Gains or losses arising on changes in the fair value of investment properties at the balance sheet date are recognised in the income statement
in the period in which they arise.
Gains or losses on sale of investment properties are calculated as the difference between the consideration received and fair value estimated
at the previous balance sheet date.
If an investment property or part of an investment property becomes owner occupied, it is reclassified as property, plant and equipment, and its
fair value at the date of reclassification becomes its cost for accounting purposes.
If an impairment trigger occurs in relation to an investment property, its value is considered against the criteria in IAS 36, being the higher of fair
value less cost to sell and value in use. Impairments are recognised in the income statement in the period they arise.
Property, plant and equipment
Property, plant and equipment not classified as investment properties or investment properties under construction is stated at historical cost
less accumulated depreciation and any accumulated impairment loss. Historical cost comprises the purchase price and costs directly incurred
in bringing the asset into use.
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. If the carrying amount of an
asset is greater than the recoverable amount then the carrying amount is written down immediately to the recoverable amount.
Depreciation is charged so as to write off the cost of an asset less estimated residual value of each asset over its expected useful life using the
straight line method. The principal rates are as follows:
Owner occupied buildings over the shorter of the remaining lease period and occupied period
2% per annum
Motor vehicles25% per annum
Fixtures, fittings, signs and partitioning
6.66%–10% per annum
The gain or loss arising on the retirement or disposal of an asset is determined as the difference between the net sales proceeds and the
carrying amount of the asset and is recognised in the income statement on disposal.
Impairment of tangible assets (excluding property)
At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is deemed to be the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset
(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant
asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease to the extent of the related revaluation
reserve, with any excess charged to the income statement.
70
Overview
Impairment of tangible assets (excluding property) continued
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate
of its recoverable amount but so that the increased carrying amount does not exceed the carrying amount that would have been determined
had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised
as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated
as a revaluation increase.
Inventories
Inventories are stated at the lower of cost less provisions for any slow-moving or obsolete stock provisions and net realisable value. Cost comprises
all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted
average method and does not include any overhead allocation as it is not appropriate. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Trade and other receivables
Trade and other receivables are stated at fair value, being cost less provision for impairment where there is evidence that not all amounts will be
collectible under the original terms of the receivable. A provision for impairment of trade receivables is established when there is objective evidence
that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Business review
Provisions for slow-moving or obsolete stock are calculated on the basis of sales made over the last year.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency
in payments (more than 28 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The
carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement
within “administrative expenses”. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Cash and cash equivalents represent only liquid assets with original maturity of 90 days or less. Bank overdrafts that cannot be offset against other
cash balances are shown within borrowings in current liabilities on the balance sheet.
Trade and other payables are initially recognised at fair value. Subsequently they are measured at amortised cost using the effective interest
rate method.
Governance
Leases
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance
lease obligation. Lease payments are apportioned between finance charges and the reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability.
Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised
in accordance with the Group’s general policy on borrowing costs.
Rentals payable under operating leases are charged to income on a straight line basis over the term of the relevant lease.
Benefits received and receivable as an incentive to enter into an operating lease are spread on a straight line basis over the full lease term.
Borrowings
Interest-bearing bank loans and overdrafts are recorded at fair value, net of directly attributable transaction costs. Finance charges, including
premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the income statement using
the effective interest method and are included within the carrying amount of the instrument to the extent that they are not settled in the period
in which they arise. Where fees are payable in relation to raising debt the costs are disclosed in the cash flow statement within financing activities.
Where payments are made to exit or modify derivative financial instruments, these costs are disclosed in the cash flow statement within
financing activities.
Financial instruments
The Group uses derivative financial instruments such as interest rate swaps to hedge risks associated with interest rate fluctuations on borrowings.
Such derivatives are initially recognised and measured at fair value on the date a derivative contract is entered into and subsequently re-measured
at fair value at each reporting date. The gain or loss on re-measurement is taken to finance expense in the income statement except where the
derivative is a designated cash flow hedging instrument. Interest costs for the period relating to derivative financial instruments, which economically
hedge borrowings, are recognised within interest payable on bank loans and overdraft. Other fair value movements on derivative financial instruments
are recognised within fair value movement of derivatives. Designation as part of a hedge relationship occurs at inception of a hedge relationship.
71
Issue costs incurred on re-financing are offset against the carrying value of borrowings in accordance with IAS 39, unless they do not solely
relate to the issuance of the new facility, in which case they are recognised as part of the gain or loss on the removal of the original facility
from the balance sheet.
Financial instruments continued
For the purpose of hedge accounting, hedges are classified as:
—— cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised
asset or liability or a forecast transaction;
—— fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability; or
—— hedges of a net investment in a foreign operation.
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly
in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted
transaction results in the recognition of an asset or a liability, then, at the time the non-financial asset or liability is recognised, the associated gains
or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges
that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period
in which the hedged item affects net profit or loss.
For an effective hedge of an exposure to changes in the fair value, the hedged item is adjusted for changes in fair value attributable to the risk
being hedged with the corresponding entry in profit or loss. Gains or losses from re-measuring the derivative or, for non-derivatives, the foreign
currency component of its carrying amount are recognised in the income statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised or no longer qualifies for hedge
accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted
transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred
to the income statement for the period.
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics
are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in
the income statement.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required
to settle that obligation. Provisions for dilapidations are measured at the Directors’ best estimate of the expenditure required to settle the obligation
at the balance sheet date and are discounted to present value where the effect is considered material.
Taxation including deferred tax
The tax credit represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates for that period that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable timing differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates and interests in
joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised if the rates
have been substantially enacted. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Employee benefit costs
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed
retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obligations under the schemes are
equivalent to those arising in a defined contribution retirement benefit scheme.
72
Overview
Share capital
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new ordinary shares are shown in equity as a deduction, net of tax, from the proceeds.
Treasury shares
The Company’s shares which have been purchased and not cancelled are held as treasury shares and deducted from shareholders’ equity,
within retained earnings.
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group’s accounting policies
The preparation of Consolidated financial statements under IFRS requires management to make estimates and assumptions that may affect
the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual outcomes may therefore
differ from these estimates and assumptions. The estimates and assumptions that have significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below:
Business review
Share based payments
Share based incentives are provided to employees under the Group’s bonus share plan, performance share plan and employee Sharesave
schemes. The Group recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured
using Black-Scholes, Binomial and Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date
of grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes,
the fair value is determined at the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation
cost is recognised on a straight line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the
vesting period due to the failure to satisfy service conditions or non-market performance conditions.
a) Estimate of fair value of investment properties and investment property under construction
The Group values its self-storage centres using a discounted cash flow methodology which is based on projections of net operating income.
Principal assumptions and management’s underlying estimation of the fair value of those relate to: stabilised occupancy levels; expected future
growth in storage rental income and operating costs; maintenance requirements; capitalisation rate; and discount rates. A more detailed explanation
of the background and methodology adopted in the valuation of the investment properties is set out in note 11 to the financial statements.
The carrying value for deferred tax assets is reviewed at each balance sheet date.
Financial risk management
Financial risk management is an integral part of the way the Group is managed. In the course of its business, the Group is exposed primarily to
foreign exchange risk, interest rate risk, liquidity risk and credit risk. The overall aim of the Group’s financial risk management policies is to minimise
potential adverse effects on financial performance and net asset values (“NAV”). The Group manages the financial risks within policies and operating
parameters approved by the Board of Directors and does not enter into speculative transactions.
Governance
b) Recognition of deferred tax assets
Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which available losses and timing
differences can be utilised as set out in note 21.
Treasury activities are managed centrally under a framework of policies and procedures approved and monitored by the Board. These objectives
are to protect the assets of the Group and to identify and then manage financial risk. In applying these policies, the Group will utilise derivative
instruments, but only for risk management purposes.
The principal financial risks facing the Group are described below:
Liquidity risk
The Group’s policy on liquidity risk is to ensure that sufficient cash is available to fund ongoing operations without the need to carry significant
net debt over the medium term. The Group’s principal borrowing facilities are provided by a Group of core relationship banks in the form of term
loans and overdrafts. The quantum of committed borrowing facilities available to the Group is reviewed regularly and is designed to exceed
forecast peak gross debt levels.
73
Interest rate risk
The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows in Sterling, Euro and US Dollars
at floating rates and, where necessary, uses interest rate swaps to convert these to fixed rates (see note 19) to generate the preferred interest
rate profile and to manage its exposure to interest rate fluctuations. A 1% change in interest rates would have a £0.4 million (FY2011: £0.9 million)
impact on net interest. This sensitivity impact has been prepared by determining average floating interest rates and flexing these against average
floating rate deposits and borrowings by major currency area over the course of the year.
Financial risk management continued
Credit risk
Credit risk arises on financial instruments such as trade receivables and short-term bank deposits. Policies and procedures exist to ensure
that customers have an appropriate credit history and account customers are given credit limits that are monitored. Short-term bank deposits
are executed only with A-rated or above authorised counterparties based on ratings issued by the major rating agencies. Counter-party exposure
positions are monitored regularly so that credit exposures to any one counter-party are within predetermined limits. Overall, the Group considers
that it is not exposed to a significant amount of credit risk. The amount of trade receivables outstanding at the year end does not represent the
maximum exposure to operational credit risk due to the normal patterns of supply and payment over the course of a year. Based on management
information collected as at month ends the maximum level of net trade receivables at any one point during the year was £10.7 million (FY2011:
£7.6 million).
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk in respect of the Euro. Foreign exchange risk arises from future
commercial transactions, recognised assets and liabilities and net investments in foreign operations.
To manage foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group uses forward contracts.
The Group’s treasury risk management policy is to enter into forward contracts for between 60% and 70% of anticipated revenues in Euros for the
subsequent 24 months.
The Group has investments in foreign operations in France, whose net assets are exposed to foreign currency translation risk. Currency exposure
arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
At 31 October 2012, if Sterling had weakened by 10% against the Euro with all other variables held constant, post-tax profit for the year would
have been £0.9 million higher (FY2011: £2.0 million), mainly as a result of foreign exchange gains/losses on translation of Euro trade receivables
and financial assets at fair value through profit or loss.
The Group is not exposed to significant transaction foreign exchange risk as purchases are invoiced in either Sterling or Euros.
Foreign exchange risk relating to the US secured notes has been fully hedged at 31 October 2012.
Hedge risk
In order to qualify as a hedge, at inception, the Group formally designates and documents the hedge relationship to which the Group wishes
to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification
of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the Group will assess the hedging
instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.
Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing
basis to determine that they actually have been highly effective throughout the financial reporting periods for which they are designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Cash flow hedges
Cash flow hedges are a hedge of the exposure to the variability in cash flows that is attributable to a particular risk associated with a recognised
asset or liability or a highly probable forecast transaction and could affect profit or loss. The effective portion of the gain or loss on the hedging
instrument is recognised directly in equity, while the ineffective portion is recognised in the income statement.
Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged
financial income or financial expense is recognised or when a forecast sale or purchase occurs. Where the hedged item is the cost of a
non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss. If the hedging
instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously
recognised in equity remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount is taken
to the income statement.
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings (including “current and non-current borrowings” as shown in the Consolidated balance
sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the Consolidated balance sheet plus net debt.
During 2012, the Group’s strategy, which was unchanged from 2011, was to maintain the gearing ratio within 50% to 70% and a Dunn & Bradstreet
5A1 credit rating.
74
Overview
Financial risk management continued
Capital risk continued
The gearing ratios at 31 October 2012 and 2011 were as follows:
2012
£’000
2011
£’000
401,107
(6,897)
399,560
(14,674)
Net debt
Total equity
394,210
243,385
384,886
275,159
Total capital
637,595
660,045
62%
58%
Gearing ratio
The Group has complied with all of the covenants on its banking facilities during the year.
3. Segmental analysis
Business review
Total borrowings (excluding derivatives)
Less: cash and cash equivalents (note 16)
The segmental information presented has been prepared in accordance with the requirements of IFRS 8. The Group’s revenue, profit before
income tax and net assets are attributable to one activity: the provision of self-storage accommodation and related services. Segmental information
is presented in respect of the Group’s geographical segment. This is based on the Group’s management and internal reporting structure.
Safestore is organised and managed in two operating segments, based on geographical areas, supported by its central Group functions:
—— UK; and
—— France.
The chief operating decision-maker, being the Executive Directors, identified in accordance with the requirements of IFRS 8, assess the performance
of the operating segments on the basis of adjusted EBITDA.
As the above two operating segments comprise 100% of the Group’s results and net assets and are both individually greater than 10%, there is no
additional segment to be disclosed as the “All other segments” category required under IFRS 8.
Governance
The operating profits and assets include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items principally comprise cash, interest-bearing loans, derivatives and current and deferred taxation and these are designated
as Central below:
France
£’000
Central
£’000
Group
£’000
Continuing operations
Revenue
74,898
23,938
—
98,836
EBITDA before exceptional items, change in fair values of derivatives,
loss on investment properties, depreciation and contingent rent
Exceptional items
Contingent rent and depreciation
Change in fair value of derivative
37,843
(385)
(595)
—
12,454
5,260
(608)
—
—
—
—
384
50,297
4,875
(1,203)
384
36,863
(36,479)
17,106
(1,057)
384
—
54,353
(37,536)
384
—
16,049
—
384
(24,549)
16,817
(24,549)
—
—
—
—
(1,805)
(9,969)
(1,805)
(9,969)
Operating profit
Finance expense before changes in fair value and exceptional items
Finance income
Profit/(loss) before tax
Income tax
Profit/(loss) for the year
Total assets
—
—
43
43
384
—
16,049
—
(35,896)
11,670
(19,463)
11,670
384
16,049
(24,226)
(7,793)
597,193
185,776
10,086
793,055
75
UK
£’000
Year ended 31 October 2012
3. Segmental analysis continued
UK
£’000
France
£’000
Central
£’000
Group
£’000
Continuing operations
Revenue
71,014
24,046
—
95,060
EBITDA before exceptional items, change in fair values of derivatives, (loss)/
gain on investment properties, depreciation and contingent rent
Exceptional items
Contingent rent and depreciation
38,405
(702)
(578)
—
12,107
(630)
(232)
—
—
—
—
(8)
50,512
(1,332)
(810)
(8)
Operating profit before gain/(loss) on investment properties
(Loss)/gain on investment properties
37,125
(25,511)
11,245
7,094
(8)
—
48,362
(18,417)
Operating profit
Finance expense
Finance income
11,614
—
—
18,339
—
—
(8)
(23,435)
2,037
29,945
(23,435)
2,037
Profit/(loss) before tax
Income tax expense
11,614
—
18,339
—
(21,406)
4,481
8,547
4,481
Profit/(loss) for the year
11,614
18,339
(16,925)
13,028
620,582
190,691
21,789
833,062
Total assets
Inter-segment transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.
There is no material impact from inter-segment transactions on the Group’s results.
The result of its revenue from external customers in the UK is £74,898,000 (FY2011: £71,014,000) and the total revenue from external customers
in other countries is £23,938,000 (FY2011: £24,046,000). All revenues are generated from the entities provision of self-storage and related services.
4. Finance income and costs
Note
Finance costs
Interest payable on bank loans and overdraft
Amortisation of debt issue costs on bank loan
Interest on obligations under finance leases
Capitalised interest
Total finance cost
18
2012
£’000
2011
£’000
(17,825)
(1,211)
(5,674)
161
(1,805)
(9,969)
(16,642)
(2,248)
(4,883)
338
—
—
(36,323)
(23,435)
43
—
212
1,825
(36,280)
(21,398)
Finance income
Interest receivable from bank deposits
Net finance costs
Interest has been capitalised at an average rate of 3.5% for the year (FY2011: 3.5%).
The exceptional finance expense of £10.0 million (FY2011: £nil) represents the debt issue costs relating to the previous banking facility written off
and the new debt issue costs of the new facility. These costs have been expensed in accordance with IAS 39 as which do not meet the recognition
criteria under IAS 39.
Included within interest payable of £17.8 million (FY2011: £16.6 million) is £2.7 million (FY2011: £4.0 million) of interest relating to derivative financial
instruments that are economically hedging the Group’s borrowings. The total change in fair value of derivatives for the year is a charge of
£1.8 million (FY2011: £1.8 million credit).
76
Overview
5. Exceptional items
2012
£’000
2011
£’000
Impairment of non-current assets
Costs relating to retirement of CEO and other restructuring costs
Costs relating to re-locating French head office
Insurance proceeds
VAT and REIT related costs
—
(165)
—
5,260
(220)
(382)
(702)
(248)
—
—
Total exceptional items
4,875
(1,332)
Restructuring costs of £165,000 (October 2011: £702,000) were incurred in respect of organisational changes during the year ended 31 October 2012.
Separately disclosed in note 8 are details of an exceptional taxation credit which has arisen as a result of the forecast change in UK corporation
tax and in note 4 are details of an exceptional interest charge following the re-financing of the Group in 2012.
Costs of £175,000 were incurred by the Group during the year ended 31 October 2012 in respect of professional and legal fees challenging the
changes to VAT legislation on self-storage which was implemented with effect from 1 October 2012.
Business review
An amount of £5.3 million was received in the year ended 31 October 2012 relating to the settlement of the insurance claim for building damage
arising from the fire at the La Défense store in Paris on 30 December 2010.
6. Operating profit
The following items have been charged in arriving at operating profit:
2012
£’000
2011
£’000
27
17,452
17,247
14
1,142
1,866
12
12
11
446
—
37,536
1,968
828
168
382
18,417
2,166
152
15
Governance
Staff costs
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
Depreciation on property, plant and equipment:
– owned assets
Impairment of property, plant and equipment
Repairs and maintenance expenditure on investment properties
Trade receivables impairment
Note
7. Fees paid to auditors
During the year, the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors at costs detailed below:
Audit services
Fees payable to Company’s auditors for the audit of the parent company and Consolidated financial statements
2012
£’000
2011
£’000
40
218
40
12
45
60
193
33
107
1
22
Total
417
396
Non-audit services for 2012 principally relate to advice on the restructuring of the Group (£60,000), advice on REIT conversion (£45,000) and advice
on IT system controls (£40,000).
77
42
Fees for other services
Fees payable to Company’s auditors for the audit of the Company’s subsidiaries pursuant to legislation
Audit-related assurance services
Tax services
General advisory
Corporate finance
8. Income tax credit
Analysis of tax credit in the year:
Note
Current tax:
– UK corporation tax
– tax in respect of overseas subsidiaries
Deferred tax:
– current year, including exceptional credit of £6,308,000 (FY2011: £6,597,000)
– adjustment in respect of prior year
21
Tax credit
2012
£’000
2011
£’000
—
(450)
—
(365)
12,040
80
4,784
62
11,670
4,481
Reconciliation of income tax credit
The tax on the Group’s (loss)/profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable
to (losses)/profits of the consolidated entities as follows:
2012
£’000
(Loss)/profit before tax
Tax calculated at domestic tax rates applicable in the UK: 24.83% (FY2011: 26.83%)
Effect of:
– income and expenses not taxable or deductable
– indexation on revaluation of investment properties
– difference from overseas tax rates
– adjustments in respect of prior years
– re-measurement of deferred tax liability from change in UK rate
Tax credit
2011
£’000
(19,463)
8,547
(4,833)
2,293
(933)
(372)
856
(80)
(6,308)
(5)
(1,325)
1,215
(62)
(6,597)
(11,670)
(4,481)
The exceptional tax credit of £6,308,000 (FY2011: £6,597,000) arises as a result of the impact on deferred tax of the UK rate change from 25%
to 23% (FY2011: 27% to 25%).
In addition to the changes in rates of corporation tax disclosed above, further changes to the UK corporation tax system were announced in the
Autumn statement 2012. This includes a further reduction to the main rate of corporation tax to 21% from 1 April 2014. This change had not been
substantively enacted at the balance sheet date and, therefore, is not included in these financial statements.
The proposed reduction to the main rate of corporation tax to 21% from 1 April 2014 will be enacted separately. The overall effect of this
further change, if it applied to the deferred tax balance at the balance sheet date, would be to further reduce the deferred tax liability by
an additional £5,393,000.
9. Dividends per share
The dividend paid in 2012 was £10,125,000 (5.4 pence per share) (FY2011: £9,375,000 (5.0 pence per share)). A dividend in respect of the year
ended 31 October 2012 of 3.80 pence (FY2011: 3.55 pence) per share, amounting to a final dividend of £7,125,000 (FY2011: £6,656,000), is to
be proposed at the AGM on 20 March 2013. The ex-dividend date will be 13 March 2013 and the record date 15 March 2013 with an intended
payment date of 12 April 2013. The final dividend has not been included as a liability at 31 October 2012.
10. Earnings per share
Basic earnings per share is calculated by dividing the (loss)/profit attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year excluding ordinary shares held as treasury shares. Diluted earnings per share is calculated by adjusting
the weighted average numbers of ordinary shares to assume conversion of all dilutive potential shares. The Company has one category of dilutive
potential ordinary shares: share options. For the share options, a calculation is done to determine the number of shares that could have been
acquired at fair value (determined as the average annual market price of the Company’s shares) based on the monetary value of the subscription
rights attached to the outstanding share options. The number of shares calculated as above is compared with the number of shares that would
have been issued assuming the exercise of the share options.
Earnings
£m
Shares
million
Pence
per share
Earnings
£m
Shares
million
Pence
per share
Basic
Dilutive securities
(7.80)
—
187.50
1.61
(4.16)
—
13.03
—
187.50
0.64
6.95
—
Diluted
(7.80)
189.11
(4.16)
13.03
188.14
6.92
As the basic EPS in the current year is a loss per share, the above adjustments would not be dilutive.
78
Overview
10. Earnings per share continued
Adjusted earnings per share
Adjusted earnings per share represents (loss)/profit after tax adjusted for the loss on investment properties, exceptional items, change in fair
value of derivatives and the associated tax thereon. The Directors consider that these alternative measures provide useful information on the
performance of the Group.
Earnings
£m
Adjusted
Pence
per share
Earnings
£m
Shares
million
Pence
per share
(7.80)
187.50
(4.16)
13.03
187.50
6.95
37.54
(4.88)
9.97
1.43
(12.51)
(6.30)
—
—
—
—
—
—
20.02
(2.60)
5.32
0.76
(6.67)
(3.36)
18.42
1.33
—
(1.83)
(4.41)
(6.60)
—
—
—
—
—
—
9.82
0.71
—
(0.98)
(2.35)
(3.52)
17.45
187.50
9.31
19.94
187.50
10.63
Business review
Basic
Adjustments:
Exceptional operating items
Exceptional finance costs
Tax in relation to adjustments
Exceptional tax credit
Shares
million
Loss on investment properties includes depreciation on leasehold properties of £4.3 million (FY2011: £5.5 million) and the related tax
thereon of £1.2 million (FY2011: £1.7 million). As an industry standard measure, EPRA earnings are presented. EPRA earnings of £14.3 million
(FY2011: £16.1 million) and EPRA earnings per share of 7.65 pence (FY2011: 8.58 pence) are calculated after further adjusting for these items.
Group
2011
£m
Movement
%
Revenue
Operating expenses (excluding depreciation and contingent rent)
98.8
(48.5)
95.1
(44.6)
+3.9
EBITDA before contingent rent
Depreciation and contingent rent
50.3
(1.2)
50.5
(0.8)
-0.4
Operating profit before depreciation on leasehold properties
Depreciation on leasehold properties
49.1
(4.3)
49.7
(5.5)
-1.2
Operating profit
Net financing costs
44.8
(24.5)
44.2
(23.2)
+1.4
Profit before income tax
Income tax
20.3
(6.0)
21.0
(4.9)
Profit for the year (“EPRA Earnings”)
14.3
16.1
7.65p
3.80p
8.58p
3.55p
EPRA adjusted income statement (non-statutory)
Adjusted EPRA earnings per share
Final dividend per share
Governance
2012
£m
-11.2
11. Investment properties, investment properties under construction and interests
in leasehold properties
Investment
property
under
construction
£’000
Total
investment
properties
£’000
As at 1 November 2011
Additions
Reclassifications
Revaluations
Depreciation
Exchange movements
713,564
7,155
20,666
(42,454)
—
(13,788)
62,534
955
—
—
(4,336)
(1,163)
15,059
10,889
(20,666)
254
—
(136)
791,157
18,999
—
(42,200)
(4,336)
(15,087)
As at 31 October 2012
685,143
57,990
5,400
748,533
79
Investment
property
£’000
Interests in
leasehold
properties
£’000
in leasehold properties continued
Investment
property
£’000
Interests in
leasehold
properties
£’000
Investment
property
under
construction
£’000
Total
investment
properties
£’000
Additions
Reclassifications
Impairments
Revaluations
Depreciation
Exchange movements
686,178
16,847
19,994
(2,230)
(8,708)
—
1,483
69,130
—
(1,220)
—
—
(5,518)
142
18,360
18,654
(19,994)
—
(1,961)
—
—
773,668
35,501
(1,220)
(2,230)
(10,669)
(5,518)
1,625
713,564
62,534
15,059
791,157
2012
£’000
2011
£’000
Loss on investment properties comprise:
Revaluations
Impairments
CGS movement on investment properties
Depreciation
(42,200)
—
9,000
(4,336)
(10,669)
(2,230)
—
(5,518)
(37,536)
(18,417)
Deemed
cost
£’000
Valuation
£’000
Revaluation
on deemed
cost
£’000
Freehold stores
Movement in year
332,895
17,265
575,719
(15,633)
242,824
(32,898)
350,160
560,086
209,926
Leasehold stores
Movement in year
74,954
(3,232)
137,845
(12,788)
62,891
71,722
125,057
53,335
All stores
Movement in year
407,849
14,033
713,564
(28,421)
305,715
421,882
685,143
263,261
(9,556)
(42,454)
The valuation of £685.1 million (FY2011: £713.6 million) excluded £0.8 million in respect of owner occupied property. Rental income earned from
investment properties for the years ended 31 October 2012 and 31 October 2011 was £79.41 million and £77.73 million, respectively.
80
Overview
The freehold and leasehold investment properties have been valued as at 31 October 2012 by external valuers, Cushman & Wakefield LLP (“C&W”).
The valuation has been carried out in accordance with the RICS Valuation – Professional Standards, published by The Royal Institution of Chartered
Surveyors (“the Red Book”). The valuation of each of the investment properties has been prepared on the basis of Fair Value as a fully equipped
operational entity, having regard to trading potential. Two non-trading properties were valued on the basis of Fair Value. The valuation has been
provided for accounts purposes and, as such, is a Regulated Purpose Valuation as defined in the Red Book. In compliance with the disclosure
requirements of the Red Book, C&W has confirmed that:
—— the members of the RICS who have been the signatories to the valuations provided to the Group for the same purposes as this valuation
have been so since October 2006;
—— C&W has been carrying out bi-annual valuations for the same purpose as this valuation on behalf of the Group since October 2006;
Business review
—— C&W does not provide other significant professional or agency services to the Group;
—— in relation to the preceding financial year of C&W, the proportion of total fees payable by the Group to the total fee income of the firm is less
than 5%; and
—— the fee payable to C&W is a fixed amount per property and is not contingent on the appraised value.
Market uncertainty
C&W’s valuation report comments on valuation uncertainty resulting from the recent global banking crisis coupled with the economic downturn,
which have caused a low number of transactions in the market for self-storage property. C&W note that, although there were a number of self-storage
transactions in 2007, the only significant transactions since 2007 are:
1. the sale of a 51% share in Shurgard Europe which was announced in January 2008 and completed on 31 March 2008;
2. the sale of the former Keepsafe portfolio by Macquarie to Alligator Self Storage which was completed in January 2010; and
3. the purchase by Shurgard Europe of the 80% interests held by its joint venture partner (Arcapita) in its two European joint venture vehicles,
First Shurgard and Second Shurgard. The price paid was €172 million and the transaction was announced in March 2011. The two joint
ventures owned 72 self-storage properties.
C&W state that due to the lack of comparable market information in the self-storage sector, there is greater uncertainty attached to their opinion
of value than would be anticipated during more active market conditions.
Valuation method and assumptions
The valuation of the operational self-storage facilities has been prepared having regard to trading potential. Cash flow projections have been
prepared for all of the properties reflecting estimated absorption, revenue growth and expense inflation. A discounted cash flow method of
valuation based on these cash flow projections has been used by C&W to arrive at their opinion of Fair Value for these properties.
Governance
Four further smaller transactions took place in 2011 at West Molesey, Cambridge, Dartford and St Albans and there has been one further
transaction in 2012 at Bletchley.
C&W has adopted different approaches for the valuation of the leasehold and freehold assets as follows:
Freehold and long leasehold (UK and France)
The valuation is based on a discounted cash flow of the net operating income over a ten year period and notional sale of the asset at the end
of the tenth year.
Assumptions:
—— Net operating income is based on projected revenue received less projected operating costs together with a central administration charge of
6% of the estimated annual revenue subject to a cap and collar. The initial net operating income is calculated by estimating the net operating
income in the first twelve months following the valuation date.
—— The capitalisation rates applied to existing and future net cash flows have been estimated by reference to underlying yields for industrial and
retail warehouse property, yields for other trading property types such as student housing and hotels, bank base rates, ten year money rates,
inflation and the available evidence of transactions in the sector. The valuation included in the accounts assumes rental growth in future periods.
If an assumption of no rental growth is applied to the external valuation, the net initial yield pre administration expenses for the 107 mature stores
(i.e. excluding those stores categorised as “developing”) is 7.50% (31 October 2011: 7.48%) rising to a stabilised net yield pre administration
expenses of 9.98% (31 October 2011: 9.81%).
—— The future net cash flow projections (including revenue growth and cost inflation) have been discounted at a rate that reflects the risk associated
with each asset. The weighted average annual discount rate adopted (for both freeholds and leaseholds) is 12.11% (31 October 2011: 12.14%).
—— Purchaser’s costs of 5.8% (UK) and 6.2% (France) (see page 82) have been assumed initially and sales plus purchaser’s costs totalling 7.8% (UK)
and 8.2% (France) are assumed on the notional sales in the tenth year in relation to freehold and long leasehold stores.
81
—— The net operating income in future years is calculated assuming straight line absorption from day one actual occupancy to an estimated stabilised/
mature occupancy level. However, a few of the properties have had variable absorption rates applied in years one to four of the cash flow projection.
In the valuation the assumed stabilised occupancy level for the trading stores (both freeholds and all leaseholds) open at 31 October 2012
averages 78.36% (31 October 2011: 78.72 %). The projected revenues and costs have been adjusted for estimated cost inflation and revenue
growth. The average time assumed for stores to trade at their maturity levels is 36.59 months (31 October 2011: 31.61 months).
Valuation method and assumptions continued
Short leaseholds (UK)
The same methodology has been used as for freeholds, except that no sale of the assets in the tenth year is assumed but the discounted
cash flow is extended to the expiry of the lease. The average unexpired term of the Group’s UK short-term leasehold properties is 11.97 years
(31 October 2011: 12.50 years). The average unexpired term excludes the French commercial leases.
Short leaseholds (France)
In relation to the French commercial leases, C&W has valued the cash flow projections in perpetuity due to the security of tenure arrangements in
that market and the potential compensation arrangements in the event of the landlord wishing to take possession. The valuation treatment is therefore
the same as for the freehold properties. The capitalisation rates on these stores reflect the risk of the landlord terminating the lease arrangements.
Investment properties under construction (UK only)
C&W has valued the stores in development adopting the same methodology as set out above but on the basis of the cash flow projection expected
for the store at opening and allowing for the outstanding costs to take each store from its current state to completion and full fit out. C&W has
allowed for carry costs and construction contingency, as appropriate.
Immature stores: value uncertainty
C&W has assessed the value of each property individually. However, ten of the stores in the portfolio are relatively immature and have low initial
cash flow. C&W has endeavoured to reflect the nature of the cash flow profile for these properties in their valuation, and the higher associated risks
relating to the as yet unproven future cash flow, by adjustment to the capitalisation rates and discount rates adopted. However, immature low cash flow
stores of this nature are rarely, if ever, traded individually in the market, unless as part of a distressed sale or similar situation. Although, there is
more evidence of immature low cash flow stores being traded as part of a group or portfolio transaction.
Please note C&W’s comments in relation to market uncertainty in the self-storage sector due to the lack of comparable market transactions and
information. The degree of uncertainty relating to the ten immature stores is greater than in relation to the balance of the properties due to there
being even less market evidence that might be available for more mature properties and portfolios.
C&W state that in practice, if an actual sale of the properties were to be contemplated then any immature low cash flow stores would normally be
presented to the market for sale lotted or grouped with other more mature assets owned by the same entity, in order to alleviate the issue of negative
or low short-term cash flow. This approach would enhance the marketability of the group of assets and assist in achieving the best price available
in the market by diluting the cash flow risk.
C&W has not adjusted their opinion of Fair Value to reflect such a grouping of the immature assets with other properties in the portfolio and all
stores have been valued individually. However, they highlight the matter to alert the Group to the manner in which the properties might be grouped
or lotted in order to maximise their attractiveness to the market place.
C&W consider this approach to be a valuation assumption but not a Special Assumption, the latter being an assumption that assumes facts that
differ from the actual facts existing at the valuation date – and which, if not adopted, could produce a material difference in value.
C&W has not assumed that the entire portfolio of properties owned by the Group would be sold as a single lot and the value for the whole portfolio
in the context of a sale as a single lot may differ significantly (either higher or lower) from the aggregate of the individual values for each property
in the portfolio, reflecting the lotting assumption described above.
Valuation assumption for purchaser’s costs
The Group’s investment property assets have been valued for the purposes of the financial statements after deducting notional purchaser’s
costs of 5.8% (UK) and 6.2% (France) of gross value, as if they were sold directly as property assets. The valuation is an asset valuation which
is entirely linked to the operating performance of the business. They would have to be sold with the benefit of operational contracts, employment
contracts and customer contracts, which would be very difficult to achieve except in a corporate structure.
This approach follows the logic of the valuation methodology in that the valuation is based on a capitalisation of the net operating income after
allowing a deduction for operational cost and an allowance for central administration costs. Sale in a corporate structure would result in a reduction
in the assumed Stamp Duty Land Tax but an increase in other transaction costs reflecting additional due diligence resulting in a reduced notional
purchaser’s cost of 2.75% of gross value. All the significant sized transactions that have been concluded in the UK in recent years were completed
in a corporate structure. The Group therefore instructed C&W to prepare additional valuation advice on the basis of purchaser’s cost of 2.75%
of gross value.
82
Overview
12. Property, plant and equipment
Owner
occupied
buildings
£’000
Motor
vehicles
£’000
Fixtures
and
fittings
£’000
Total
£’000
Cost
At 1 November 2011
Additions
Disposals
800
—
—
237
40
(8)
2,514
1,296
(2)
3,551
1,336
(10)
At 31 October 2012
3,808
4,877
72
15
—
98
60
(8)
525
371
(2)
695
446
(10)
At 31 October 2012
87
150
894
1,131
Net book value
At 31 October 2012
713
119
2,914
3,746
At 31 October 2011
728
139
1,989
2,856
Owner
occupied
buildings
£’000
Motor
vehicles
£’000
Fixtures
and
fittings
£’000
Total
£’000
Cost
At 1 November 2010
Additions
Disposals
1,000
—
(200)
269
99
(131)
1,272
1,513
(271)
2,541
1,612
(602)
At 31 October 2011
800
237
2,514
3,551
Accumulated depreciation
At 1 November 2010
Charge for the year
Impairment
Eliminated on disposal
78
10
184
(200)
191
38
—
(131)
478
120
198
(271)
747
168
382
(602)
At 31 October 2011
72
98
525
695
Net book value
At 31 October 2011
728
139
1,989
2,856
At 31 October 2010
922
78
794
1,794
Governance
269
Business review
800
At 1 November 2011
Charge for the year
Disposals
83
13. Adjusted net assets per share
2012
£’000
2011
£’000
Analysis of net asset value:
Basic and diluted net asset value
Adjustments: deferred tax liabilities
243,385
100,841
275,159
116,510
Adjusted net asset value
344,226
391,669
129.8
129.3
183.6
146.8
146.3
208.9
Number
Number
187,495,348
187,495,348
Basic net assets per share (pence)
Diluted net assets per share (pence)
Adjusted net assets per share (pence)
Shares in issue
Basic net assets per share is shareholders’ funds divided by the number of shares at the year end. Diluted net assets per share is shareholders’
funds divided by the number of shares at the year end, adjusted for dilutive share options of 1,161,335 shares (FY2011: 640,834 shares). Adjusted
net assets per share excludes deferred tax liabilities. The EPRA NAV, which further excludes fair value adjustments for debt and related derivatives
net of tax, was £353.6 million (FY2011: £396.2 million) giving EPRA net assets per share of 188.6 pence (FY2011: 211.3 pence). The Directors
consider that these alternative measures provide useful information on the performance of the Group.
EPRA adjusted balance sheet (non-statutory)
Group
2012
£m
2011
£m
Movement
%
Assets
Non-current assets
Current assets
765.4
27.7
799.4
31.9
-4.2
-13.2
Total assets
793.1
831.3
-4.6
Liabilities
Current liabilities
Non-current liabilities
(44.5)
(395.0)
(55.3)
(379.8)
-19.5
Total liabilities
(439.5)
(435.1)
+1.0
EPRA net asset value
353.6
396.2
-10.8
188.6p
211.3p
EPRA net asset value per share
+4.0
14. Inventories
Finished goods and goods held for resale
Less: provisions for impairment of inventories
2012
£’000
2011
£’000
336
(129)
348
(106)
207
242
The Group consumed £1,142,000 (FY2011: £1,866,000) of inventories during the year. Inventory write downs were £nil for both the financial years
ended 31 October 2012 and 31 October 2011.
Inventories of £207,000 (FY2011: £242,000) are carried at fair value less costs to sell. Provisions are made against slow-moving and obsolete stock
lines where considered appropriate.
84
Overview
15. Trade and other receivables
2011
£’000
Current:
Trade receivables
Less: provision for impairment of receivables
7,830
(1,066)
8,118
(789)
Trade receivables – net
Other receivables
Prepayments and accrued income
6,764
4,981
5,841
7,329
1,476
8,213
17,586
17,018
2012
£’000
2011
£’000
789
828
(551)
1,248
152
(611)
1,066
789
Movements on the Group provision for impairment of trade receivables are as follows:
Provisions for doubtful debts against trade receivables:
At 1 November
Provision for receivables impairment
Receivables written off during the year as uncollectible
At 31 October
Business review
2012
£’000
The creation and release of provision for impaired receivables have been included in “administrative expenses” in the income statement.
Trade receivables that are less than 28 days overdue are not considered impaired. As of 31 October 2012, trade receivables of £166,000
(FY2011: £180,000) were past due but not impaired. These relate to a number of customers who benefit from an extension to normal terms
and for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
2011
£’000
166
180
The above balances are short-term (including other receivables) and therefore the difference between the book value and the fair value of the
above receivables is not significant. Consequently these have not been discounted.
Governance
Up to 28 days overdue
2012
£’000
As of 31 October 2012, trade receivables of £1,066,000 (FY2011: £789,000) were impaired and provided for in full. There is no concentration
of credit risk with respect to trade receivables as the Group has a large number of customers.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
Euros
2012
£’000
2011
£’000
12,146
5,440
11,196
5,822
17,586
17,018
2012
£’000
2011
£’000
6,897
14,674
16. Cash and cash equivalents
85
Cash at bank and in hand
17. Trade and other payables
Current:
Trade payables
Other taxes and social security payable
Corporation tax payable
Other payables
Accruals and deferred income
Non-current:
Other payables
2012
£’000
2011
£’000
8,261
2,235
40
2,855
18,889
9,442
810
365
4,813
19,618
32,280
35,048
—
529
2012
£’000
2011
£’000
—
—
12,500
(2,357)
—
10,143
2012
£’000
2011
£’000
18. Financial liabilities – bank borrowings and secured notes
Current
Bank loans and overdrafts due within one year or on demand:
Secured – bank loan
Debt issue costs
Non-current
Bank loans and secured notes:
Secured
Debt issue costs
343,897
(780)
328,838
(1,955)
343,117
326,883
On 9 May 2012, the Group completed a full re-financing of its lending arrangements with total facilities of £400 million to replace the previous
facilities of £385 million which were all due to expire in August 2013. The new bank facilities of £270 million and €70 million run to June 2016
and a new £73 million US private placement note issue of seven and twelve years has maturities extending to 2019 and 2024.
The blended cost of interest on the overall debt is expected to be in the order of 5.5% per annum. The bank facilities attract a margin over
LIBOR/EURIBOR ratchet operated by reference to the Group’s performance against its interest cover covenant. The margin ratchets between
2.5% and 3.5%, with an initial margin of 3.5% for the first six months of the facilities. Approximately two-thirds of the drawn bank facilities have
been hedged at 2.08% LIBOR and 1.36% EURIBOR. The Company has issued $67 million 5.52% Series A Senior Secured Notes due 2019
and 6.29% $48 million Series B Senior Secured Notes due 2024. The proceeds of the US private placement have been fully hedged by new
cross currency swaps converting the US Dollar exchange risk into GBP Sterling. The loan is carried at amortised cost.
The bank loans and overdrafts are secured by a fixed charge over the Group’s investment property portfolio. Following the bank re-financing
in May 2012, as part of the interest rate management strategy, the Group entered into several interest rate swap contracts, details of which are
shown in note 19.
Bank loans and secured notes are stated before unamortised issue costs of £780,000 (FY2011: £4,312,000).
Bank loans and secured notes are repayable as follows:
Group
2012
£’000
2011
£’000
In one year or less
Between one and two years
Between two and five years
After more than five years
—
—
272,705
71,192
12,500
328,838
—
—
Bank loans and secured notes
Unamortised issue costs due within one year
Unamortised issue costs due after one year
343,897
—
(780)
341,338
(2,357)
(1,955)
343,117
337,026
86
Overview
18. Financial liabilities – bank borrowings and secured notes continued
The effective interest rates at the balance sheet date were as follows:
Bank loans
2012
2011
Quarterly LIBOR plus 3.5%
Quarterly EURIBOR plus 3.5%
Quarterly LIBOR plus 2.75%
Quarterly EURIBOR plus 2.75%
Secured loan notes bear interest at 5.52% and 6.29%.
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 31 October in respect of which all conditions precedent
had been met at that date:
2011
£’000
53,698
43,778
2012
£’000
2011
£’000
230,000
42,705
71,192
315,000
26,338
—
343,897
341,338
Expiring beyond one year
The carrying amounts of the Group’s borrowings are denominated in the following currencies:
Sterling
Euros
US Dollar
Business review
Floating rate
2012
£’000
19. Financial instruments
Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the Financial review.
Interest rate swaps
Cross currency swaps
Foreign exchange contracts
2011
£’000
Liability
2,570
—
432
3,002
£’000
Asset
£’000
Liability
(11,060)
(4,326)
(56)
—
—
84
(6,170)
—
(86)
(15,442)
84
(6,256)
Governance
2012
£’000
Asset
The fair value of financial instruments that are not traded in an active market, such as over-the-counter derivatives, is determined using valuation
techniques. The Group obtains such valuations from counterparties who use a variety of assumptions based on market conditions existing at
each balance sheet date.
The fair values of all financial instruments are equal to their book value, with the exception of bank loans and finance lease obligations which are
set out below. The carrying value less impairment provision of trade receivables, other receivables and the carrying value of trade payables and
other payables are assumed to approximate their fair value.
The fair values of bank loans and finance leases are calculated as:
2012
Book value
£’000
Fair value
£’000
Book value
£’000
Fair value
£’000
343,117
57,990
396,692
96,231
337,026
62,534
350,874
83,684
87
Bank loans
Finance lease obligations
2011
19. Financial instruments continued
Fair value hierarchy
IFRS 7 requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the inputs used in
the measurements, according to the following levels:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset of liability, either directly or indirectly.
Level 3 – inputs for the asset of liability that are not based on observable market data.
The table below shows the level in the fair value hierarchy into which fair value measurements have been categorised:
Assets per the balance sheet
Derivative financial instruments – Level 2
Liabilities per the balance sheet
Derivative financial instruments – Level 2
2012
£’000
2011
£’000
3,002
84
2012
2011
£’000
£’000
15,442
6,256
There were no transfers between Levels 1, 2 and 3 fair value measurements during the current or prior year.
Over the life of the Group’s derivative financial instruments, the cumulative fair value gain/loss on those instruments will be £nil as it is the
Group’s intention to hold them to maturity.
Interest rate swaps not designated as part of a hedging arrangement
The notional principal amount of the outstanding interest rate swap contracts at 31 October 2012 was £196,687,575 and €40,000,000
(FY2011: £233,100,000 and €24,000,000). At 31 October 2012 the fixed interest rates were Sterling at blended 1.710% and Euro at 1.361%
(FY2011: Sterling at 2.325% and Euro at 1.67%) and floating rates are at quarterly LIBOR and quarterly EURIBOR. The LIBOR swaps and the
EURIBOR swaps expire in June 2016.
In May 2012, the Group entered into a new banking facility agreement which replaced the existing facilities due to mature in August 2013.
The existing interest hedge agreements were replaced by new interest hedge agreements to coincide with the new maturity in June 2016.
No settlement payments were required to be made to any counterparties and the embedded value of the existing interest hedge agreements
were incorporated within the new agreements. The movement in fair value recognised in the income statement was a loss of £1,805,000
(FY2011: gain of £1,825,000).
Foreign exchange swap not designated as part of a hedging arrangement
At 31 October 2012, the Group had foreign currency swap contracts outstanding for a notional principal amount of between €4,500,000
and €6,000,000 every six months commencing November 2012 and terminating on 31 October 2015. The Group will receive the Sterling
equivalent of the notional principal amount at an average exchange rate of €1.2198 to the pound and pay the Sterling equivalent of the average
monthly spot rates for the six months. The movement in the fair value recognised in the income statement in the period was a gain of £384,000
(FY2011: loss of £8,000).
Cross currency swaps designated as part of a hedging arrangement
In May 2012, the Group entered into cross currency swaps to mitigate the foreign exchange risk arising on future interest payments and
the principal repayments arising from the $67 million and $48 million US Secured Senior Notes. These cross currency swaps commenced in
May 2012 and terminate in 2019 and 2024 in line with the maturity of the notes. The movement in fair value recognised in other comprehensive
income in the period was a loss of £2,835,000 (pre-tax impact).
88
Overview
Financial instruments by category
Total
£’000
Assets as per balance sheet
Trade receivables and other receivables excluding prepayments
11,745
—
6,897
—
3,002
—
11,745
3,002
6,897
18,642
3,002
21,644
Liabilities at fair
value through
profit and loss
£’000
Other financial
liabilities at
amortised cost
£’000
Total
£’000
Liabilities as per balance sheet
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Trade payable and other payables
—
—
15,442
—
343,117
57,990
—
32,280
343,117
57,990
15,442
32,280
15,442
433,387
448,829
Loans and
receivables
£’000
Assets at fair
value through
profit and loss
£’000
Total
£’000
Trade receivables and other receivables excluding prepayments
8,805
—
14,674
—
84
—
8,805
84
14,674
23,479
84
23,563
Liabilities at fair
value through
profit and loss
£’000
Other financial
liabilities at
amortised cost
£’000
Total
£’000
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Trade payable and other payables
—
—
6,256
—
337,026
62,534
—
35,577
337,026
62,534
6,256
35,577
6,256
435,137
441,393
Group
Group
Group assets as per balance sheet
Group liabilities as per balance sheet
Governance
Assets at fair
value through
profit and loss
£’000
Business review
Loans and
receivables
£’000
The interest rate risk profile, after taking account of derivative financial instruments, is as follows:
2012
Fixed rate
£’000
Total
£’000
Floating rate
£’000
Fixed rate
£’000
Total
£’000
41,516
301,601
343,117
82,857
254,169
337,026
The weighted average interest rate of the fixed rate financial borrowing was 2.757% (FY2011: 2.271%) and the weighted average period for which
the rate is fixed was four years for bank borrowings and seven/twelve years for the notes (FY2011: two years for bank debt; nil for notes).
89
Borrowings
2011
Floating rate
£’000
Financial instruments by category continued
The table below analyses the Group’s financial liabilities and non-settled derivative financial instruments into relevant maturity groupings based
on the remaining period at the balance sheet date to the contractual maturity dates. The amounts disclosed in the table are the contractual
undiscounted cash flows.
2012
Borrowings
Contractual interest payments and finance lease charges
2011
Borrowings
Contractual interest payments and finance lease charges
Less than
one year
£’000
One to two
years
£’000
Two to five
years
£’000
More than
five years
£’000
16,473
6,973
10,151
32,280
21,470
6,973
10,024
—
302,300
17,919
24,329
—
89,571
19,404
51,727
—
65,877
38,467
344,548
160,702
25,620
3,384
10,637
35,048
341,960
3,384
10,597
529
—
—
25,133
—
—
—
51,267
74,689
356,470
25,133
51,267
20. Obligations under finance leases
—
Present value of
minimum lease payments
Minimum lease payments
2012
£’000
2011
£’000
2012
£’000
2011
£’000
Within one year
Within two to five years
Greater than five years
10,151
34,353
51,727
10,637
35,730
51,266
9,598
25,211
23,181
10,040
26,747
25,747
96,231
(38,241)
97,633
(35,099)
57,990
—
62,534
Less: future finance charges on finance leases
Present value of finance lease obligations
57,990
62,534
57,990
62,534
2012
£’000
2011
£’000
9,598
48,392
10,040
52,494
57,990
62,534
Current
Non-current
—
21. Deferred income tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 23% (FY2011: 25%) for the UK and 33.33%
(FY2011: 33.3%) for France. The movement on the deferred tax account is as shown below:
The gross movement on the deferred income tax account is as follows:
Note
At 1 November
Profit and loss credit
Released to equity
Exchange differences
At 31 October
90
8
2012
£’000
2011
£’000
109,480
(12,120)
(1,074)
(2,529)
114,059
(4,846)
—
266
93,757
109,479
Overview
21. Deferred income tax continued
At 31 October 2012, the Group had capital losses of £4.0 million (FY2011: losses of £4.0 million) in respect of its UK operations.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.
The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS12) during
the period are shown below.
Other
timing
differences
£’000
Total
£’000
At 1 November 2010
Credit to income statement
Released to equity
123,422
(6,846)
—
319
(865)
480
—
—
122,557
(6,366)
—
319
At 31 October 2011
116,895
(385)
116,510
(13,264)
(2,956)
551
—
(12,713)
At 31 October 2012
100,675
166
100,841
Deferred tax asset
Tax losses
£’000
Interest swap
£’000
Total
£’000
6,261
(885)
2,237
(635)
8,498
(1,520)
Released to equity
—
53
—
—
53
At 31 October 2011
5,429
1,602
7,031
(778)
—
(424)
181
1,074
—
(597)
1,074
4,227
2,857
7,084
2012
£’000
2011
£’000
1,881
1,881
Deferred tax liability
At 1 November 2011
Credit to income statement
At 1 November 2010
Charged to income statement
At 31 October 2012
(2,956)
—
Governance
At 1 November 2011
Charged to income statement
Charged to equity
Business review
Revaluation of
investment
properties
£’000
(424)
The deferred tax liability due after more than one year is £100.8 million (FY2011: £116.5 million).
22. Called up share capital
Called up, allotted and fully paid
188,135,088 (FY2011: 188,135,088) ordinary shares of 1 pence each
Ordinary shares
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
91
22. Called up share capital continued
Safestore Holdings plc Sharesave scheme
The fair value of the options was assessed by an independent actuary using a Black-Scholes model based on the assumptions set out in the
table below:
Grant date
14 August 2008
Number of options granted
Share price at grant date
Exercise price
Risk-free rate of interest
Expected volatility
Expected dividend yield
Expected term to exercise
Value per option
(pence)
(pence)
(% per annum)
(% per annum)
(% per annum)
(years)
(pence)
Grant date
11 August 2011
(UK three years)
(UK five years)
(UK three years)
(UK five years)
130,350
141
118.4
4.50
40
3.0
3
47
136,955
141
118.4
4.55
40
3.0
5
53
469,067
98.25
104
1.56
52
5.1
3
25
212,375
98.25
104
2.58
57
5.1
5
33
Safestore 2009 Performance Share Plan
The fair values of the awards granted in the accounting period were assessed by an independent actuary using a Monte Carlo model based on
the assumptions set out in the table below. In determining an appropriate assumption for expected future volatility, the historical volatility of the
share price of Safestore Holdings plc has been considered along with the historical volatility of comparator companies.
Grant date February 2011
Number of options granted
Share price at grant date
Exercise price
Risk-free rate of interest
Expected volatility
Expected term to exercise
Value per option
(pence)
(pence)
(% per annum)
(% per annum)
(years)
(pence)
Grant date February 2012
(PBT-EPS part)
(TSR part)
(PBT-EPS part)
(TSR part)
745,239
147.25
0
n/a
n/a
n/a
147.25
372,619
147.25
0
1.43
53
3.0
106.28
820,997
112.0
0
n/a
0
n/a
112.00
410,499
112.0
0
0.52
40
3.0
78.18
During the accounting period, there were no new grants or options exercised under the Sharesave schemes and 245,750 awards lapsed as
shown in the table below. 1,231,496 awards were granted under the 2009 Performance Share Plan and 1,544,815 awards lapsed under the
2009 Performance Share Plan. At the end of the accounting period, options over 464,447 ordinary shares were outstanding under the Sharesave
scheme and 4,032,860 awards in the Performance Share Plan remain unvested. Details of the awards outstanding under all of the Group’s share
schemes over the accounting years are set out below:
Lapsed
At
31 October
2012
Exercise
price
Expiry
date
—
—
—
—
15,148
27,490
128,069
75,043
—
—
327,115
137,332
147.0p
118.4p
104.0p
104.0p
09/02/2013
14/02/2014
11/02/2015
11/02/2017
—
—
245,750
464,447
2,241,703
986,618
1,117,858
—
—
—
—
1,231,496
—
—
—
—
1,544,815
—
—
—
696,888
986,618
1,117,858
1,231,496
0.0p
0.0p
0.0p
0.0p
27/03/2012
24/02/2013
01/04/2015
4,346,179
1,231,496
—
1,544,815
4,032,860
At
31 October
2011
Granted
Exercised
Sharesave scheme
09/08/2007
14/08/2008
11/08/2011
11/08/2011
15,148
27,490
455,184
212,375
—
—
—
—
Total
710,197
Safestore 2009
27/03/2009
24/02/2010
01/02/2011
01/02/2012
Total
Date of grant
No options have been modified since grant under any of the schemes.
92
01/02/2015
Overview
23. Retained earnings
Notes
Profit for the year
Dividend payment
9
£’000
229,244
13,028
(9,375)
217
233,114
Loss for the year
Dividend payment
9
215,384
Included within retained earnings are ordinary shares with a nominal value of £6,397 (FY2011: £6,397) that represent shares allotted to the
Safestore Employee Benefit Trust in satisfaction of awards under the Group’s Long Term Incentive Plan in 2008 and which remain unvested.
24. Other reserves
Profit for the year
Dividends
Hedge
reserve
£’000
Retained
earnings
£’000
Total
£’000
9
10,715
—
—
—
—
—
229,244
13,028
(9,375)
239,959
13,028
(9,375)
1,100
—
—
—
—
217
1,100
217
11,815
—
233,114
244,929
—
—
—
—
(7,793)
(10,125)
(7,793)
(10,125)
(12,283)
—
—
—
—
—
(4,327)
1,492
1,074
—
—
—
—
—
188
(12,283)
(4,327)
1,492
1,074
(468)
(1,761)
215,384
213,155
Loss for the year
Dividends
Change in value of interest rate swaps
Tax on items taken to other comprehensive income
9
Governance
Notes
Translation
reserve
£’000
Business review
(7,793)
(10,125)
188
188
The translation reserve balance of £468,000 adverse (FY2011: £11,815,000) comprises all foreign exchange differences arising from the translation
of the financial statements of foreign operations. The hedge reserve balance of £1,761,000 (FY2011: £nil) comprises the unrealised elements of
derivative financial instruments recognised in equity.
93
25. Cash flow from operating activities
Reconciliation of operating profit to net cash inflow from operating activities:
2012
£’000
Cash generated from continuing operations
2011
£’000
Profit before income tax
Depreciation
Impairment of non-current assets
Finance income
Finance expense
Changes in working capital:
Decrease in inventories
Decrease/(increase) in trade and other receivables
Decrease in trade and other payables
(19,463)
37,536
446
(384)
—
(43)
36,323
188
8,547
18,417
168
8
382
(2,037)
23,435
217
29
1,828
(4,794)
12
(950)
(1,410)
Cash generated from continuing operations
51,666
46,789
26. Analysis of movement in net debt
2011
£’000
Cash flows
£’000
Non-cash
movements
£’000
2012
£’000
14,674
(7,150)
(627)
6,897
Debt due within one year
Debt due after one year
14,674
(10,143)
(326,883)
(7,150)
—
(6,055)
(627)
10,143
(10,179)
6,897
—
(343,117)
Total net debt excluding finance leases
(322,352)
(13,205)
(663)
(336,220)
Finance leases due within one year
Finance leases due after one year
(10,040)
(52,494)
4,336
—
(3,894)
4,102
(9,598)
(48,392)
Total finance leases
(62,534)
4,336
208
(57,990)
(384,886)
(8,869)
(455)
(394,210)
Cash in hand
Total net debt
Non-cash movements relate to reclassification of non-current debt to current debt, amortisation of debt issue costs, foreign exchange movements
and unwinding of discount.
27. Employees and Directors
Staff costs (including Directors) for the Group during the year
Wages and salaries
Social security costs
Other pension costs
94
2012
£’000
2011
£’000
14,697
2,174
393
188
14,479
2,184
367
217
17,452
17,247
Overview
27. Employees and Directors continued
During the period ended 31 October 2012 the Company’s equity-settled share based payment arrangements comprised the Safestore Holdings plc
Sharesave scheme and the Safestore 2009 Performance Share Plan. The number of awards made under each scheme are detailed in note 22.
No options have been modified since grant under any of the schemes.
Average monthly number of people (including Executive Directors) employed
Sales
Administration
Wages and salaries
Social security costs
Post-employment benefits
Compensation for loss of office
2011
Number
467
102
440
81
569
521
2012
£’000
2011
£’000
1,903
250
154
—
188
2,490
584
207
393
209
2,495
3,883
2012
£’000
2011
£’000
963
1,318
—
75
393
1,038
1,802
Business review
Key management compensation
2012
Number
The key management figures given above include Directors.
Directors
Aggregate emoluments
Compensation for loss of office
Company contributions paid to money purchase pension schemes
91
28. Contingent liabilities
Governance
There were two Directors (FY2011: three) accruing benefits under a money purchase scheme.
As part of the Group banking, the Company has guaranteed the borrowings totalling £343.9 million (FY2011: £341.3 million) of fellow Group
undertakings by way of a charge over all of its property and assets. There are similar cross guarantees provided by the Group companies in
respect of any bank borrowings which the Company may draw under a Group facility agreement. The financial liability associated with this
guarantee is considered remote and therefore no provision has been recorded.
29. Capital commitments
The Group had £2.3 million capital commitments as at 31 October 2012 (FY2011: £17.1 million).
30. Related party transactions
The Group’s shares are widely held.
During the year £nil (FY2011: £nil) transactions were carried out with related parties.
31. Parent company
Safestore Holdings plc is a limited liability company incorporated in England and Wales and domiciled in the UK. It operates as the ultimate
parent company of the Safestore Holdings plc Group.
95
Independent auditors’ report
to the members of Safestore Holdings plc
We have audited the parent company financial statements of Safestore Holdings plc for the year ended 31 October 2012 which comprise the
parent company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’ responsibilities set out on page 61, the Directors are responsible for the preparation of
the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the parent company financial statements:
—— give a true and fair view of the state of the company’s affairs as at 31 October 2012;
—— have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
—— have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
—— the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and
—— the information given in the Directors’ report for the financial year for which the parent company financial statements are prepared is
consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
—— adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
—— the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
—— certain disclosures of Directors’ remuneration specified by law are not made; or
—— we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements of Safestore Holdings plc for the year ended 31 October 2012.
Matthew Mullins (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Birmingham
30 January 2013
96
Company balance sheet
Overview
as at 31 October 2012
Company
Fixed assets
Tangible fixed assets
Fixed asset investments
2012
£’000
2011
£’000
5
6
—
979
4
979
979
983
819
116,847
21
724
41,869
Current assets
Debtors: amounts falling due within one year
Debtors: amounts falling due after more than one year
Cash at bank and in hand
7
7
8
117,687
(2,497)
42,612
Creditors: amounts falling due within one year
Total assets less current liabilities
Creditors: amounts falling due after more than one year
116,169
(71,904)
43,112
9
44,265
43,112
Net assets
19
(483)
Business review
Notes
—
Capital and reserves
Called up share capital
Share premium account
Profit and loss reserve
10
11
11
1,881
28,349
14,035
1,881
28,349
Total shareholders’ funds
12
44,265
43,112
12,882
The Company financial statements on pages 97 to 101 were approved by the Board of Directors on 30 January 2013 and signed on its behalf by:
P D Gowers
Governance
R D Hodsden
Company registration number: 4726380
97
Notes to the Company financial statements
1. Accounting policies and basis of preparation
The financial statements are prepared in accordance with applicable accounting standards in the UK and the Companies Act 2006. The particular
accounting policies adopted are described below. The financial statements are prepared on a going concern basis under the historical cost convention.
Although the Group consolidated accounts are prepared under IFRS, Safestore Holdings plc’s financial statements presented in this section are
prepared under UK GAAP.
There have been no new accounting standards adopted during the year.
Investments
Investments held as fixed assets are stated at cost less provision for impairment in value.
Tangible fixed assets
Fixtures and fittings are stated at historic purchase cost less accumulated depreciation. Costs are all directly attributable costs in bringing the
asset into working condition for its intended use. Depreciation has been charged at the rate of 15% per annum on a straight line basis.
Cash flow statement
The Company has taken advantage of the exemption given in FRS 1 and has consequently not prepared a cash flow statement.
Deferred taxation
Deferred taxation is provided on timing differences arising from the different treatment for accounts and taxation purposes of event and transactions
recognised in the financial statements of the current and previous years. Deferred taxation is calculated at the rates at which it is estimated that
taxation will arise.
Deferred taxation is not provided in respect of timing differences arising from the sale or revaluation of fixed assets unless, by the balance sheet
date, a binding commitment to sell the asset has been entered into and it is unlikely that any gain will be rolled over.
Deferred taxation assets are recognised to the extent that it is regarded as more likely than not that there will be suitable taxable profits against
which the deferred tax asset can be recovered in future years.
Share based incentives are provided to employees under the Company’s bonus share plan, performance share plan and employee Sharesave
schemes. The Company recognises a compensation cost in respect of these schemes that is based on the fair value of the awards, measured
using Black-Scholes, Binomial and Monte Carlo valuation methodologies. For equity-settled schemes, the fair value is determined at the date of
grant and is not subsequently re-measured unless the conditions on which the award was granted are modified. For cash-settled schemes, the
fair value is determined at the date of grant and is re-measured at each balance sheet date until the liability is settled. Generally, the compensation
cost is recognised on a straight line basis over the vesting period. Adjustments are made to reflect expected and actual forfeitures during the
vesting period due to the failure to satisfy service conditions or non-market performance conditions.
Profit and loss account
Interest income is recognised using the effective interest method. Dividend income is recognised when the right to receive payment is established.
Dividends
The annual final dividend is not provided for until approved at the AGM whilst interim dividends are charged in the period they are paid.
2. Results of parent company
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these
financial statements. The parent company’s profit for the financial year amounted to £11,090,000 (FY2011: £9,909,000).
3. Directors’ emoluments
The Directors’ emoluments are disclosed in note 27 of the Annual Report and financial statements of the Group.
4. Operating profit
The Company does not have any employees (FY2011: none). Auditors’ remuneration for the year ended 31 October 2012 was £10,000
(FY2011: £10,000). There were no non-audit services (FY2011: none) provided by the auditors.
98
Overview
5. Tangible fixed assets – fixtures and fittings
£’000
Cost
As at 31 October 2011 and at 31 October 2012
196
Charge for the year
192
At 31 October 2012
196
Net book amount
At 31 October 2012
—
4
4
6. Fixed asset investments
£’000
Cost and net book value
At 31 October 2011 and 31 October 2012
Business review
At 31 October 2011
979
Investments in Group undertakings are stated at cost. The Directors consider that to give full particulars of all subsidiary undertakings would
lead to a statement of excessive length. A list of principal subsidiary undertakings is given below. The Directors believe that the carrying value
of the investments is supported by their underlying net assets.
Interests in subsidiary undertakings
The Company has the following wholly-owned subsidiaries, unless stated otherwise:
Country of incorporation
Principal activity
Safestore Group Limited
Safestore Acquisition Limited1
Safestore Limited2
Spaces Personal Storage Limited2
Mentmore Limited3
Safestore Properties Limited4
Une Pièce en Plus SAS5
Access Storage Holdings (France) S.a.r.l5
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
France
Luxembourg
Holding company
Holding company
Provision of self-storage
Holding company
Holding company
Holding company
Provision of self-storage
Holding company
100
100
100
100
100
100
100
100
Governance
Subsidiary
Proportion of
ordinary shares
held %
Notes
1 Safestore Acquisition Limited is a 100% subsidiary of Safestore Group Limited.
2 Safestore Limited and Spaces Personal Storage Limited are both 100% subsidiaries of Safestore Acquisition Limited.
3 Mentmore Limited is a 100% subsidiary of Safestore Acquisition Limited.
4 Safestore Properties Limited is a 100% subsidiary of Mentmore Limited.
5 Une Pièce en Plus SAS and Access Storage Holdings (France) S.a.r.l are both 100% subsidiaries of Mentmore Limited.
99
Notes to the Company financial statements continued
7. Debtors
Amounts owed by Group undertakings
Trade receivables
Other receivables
Prepayments and accrued income
2012
£’000
2011
£’000
689
123
—
7
534
122
53
15
819
724
Amounts owed by Group undertakings
Deferred tax
116,799
48
41,821
48
Debtors due after more than one year
116,847
41,869
2012
£’000
2011
£’000
Trade payables
Amounts owed to Group undertakings
Other taxes and social security
Accruals and deferred income
201
1,855
109
332
46
—
—
437
Creditors due within one year
2,497
483
2012
£’000
2011
£’000
Debtors due within one year
8. Creditors: amounts falling due within one year
9. Creditors: amounts falling due after more than one year
Secured loan notes
Debt issue costs
72,684
(780)
—
—
71,904
—
The Company issued $67 million 5.52% Series A Senior Secured Notes due 2019 and 6.29% $48 million Series B Senior Secured notes due 2024.
10. Called up share capital
2012
£’000
2011
£’000
Allotted and fully paid
188,135,088 (FY2011: 188,135,088) ordinary shares of 1 pence
1,881
1,881
At 31 October
1,881
1,881
Ordinary shares
The holders of the ordinary shares shall be entitled to one vote for each ordinary share.
For details of share options see note 22 in the Group financial statements.
100
Overview
11. Reserves
Share premium
account
£’000
Profit and
loss reserve
£’000
At 1 November 2011
Profit for the year
Dividends paid
28,349
—
—
—
12,882
11,090
188
(10,125)
At 31 October 2012
28,349
14,035
2012
£’000
2011
£’000
For details of the dividend paid in the year see note 9 in the Group financial statements.
Profit for the year
Dividends paid
11,090
(10,125)
188
9,909
(9,375)
217
At 1 November 2011/2010
43,112
42,361
At 31 October 2012/2011
44,265
43,112
Business review
12. Reconciliation of movements in shareholders’ funds
13. Related party transactions
The Company has taken advantage of the exemption available under FRS 8, ‘Related Party Disclosures’ and has not disclosed details of its
transactions with related certain parties. This exemption is available as the transactions are with entities that are part of the same group and
the consolidated accounts are publicly available.
14. Contingent liabilities
For details of contingent liabilities see note 28 in the Group financial statements.
Governance
101
Notice of Annual General Meeting
This information is important and requires your immediate attention. If you have any doubts about what action you need to take, you
should contact your stockbroker, bank manager, solicitor, accountant or other independent professional adviser authorised pursuant to the
Financial Services and Markets Act 2000 immediately.
If you have sold or transferred all of your holding of ordinary shares in Safestore Holdings plc you should pass this information and the
accompanying documents to the person through whom the sale or transfer was effected, for transmission to the purchaser or transferee.
SAFESTORE HOLDINGS PLC
NOTICE OF ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of Safestore Holdings plc (the “Company”) will be held at Brittanic House,
Stirling Way, Borehamwood, Hertfordshire WD6 2BT on 20 March 2013 at 12.00 noon for the following purposes:
To consider, and if thought fit, pass the following resolutions, of which numbers 1 to 10 will be proposed as ordinary resolutions and numbers
11 to 13 will be proposed as special resolutions:
Ordinary resolutions
1.To receive the Company’s annual accounts for the financial year ended 31 October 2012, together with the Directors’ report, and the
Auditors’ report on those accounts and on the auditable part of the Directors’ remuneration report.
2.To re-appoint PricewaterhouseCoopers LLP as auditors to hold office from the conclusion of this Meeting until the conclusion of the next
general meeting of the Company at which accounts are laid.
3.
To authorise the Directors to determine the auditors’ remuneration.
4.To declare a final dividend for the year ended 31 October 2012 of 3.80 pence per ordinary share payable to shareholders on the register
at the close of business on 15 March 2013.
5.
To re-appoint Richard Grainger as a Director of the Company in accordance with the Company’s Articles of Association.
6.
To re-appoint Keith Edelman as a Director of the Company in accordance with the Company’s Articles of Association.
7.
To re-appoint Peter Gowers as a Director of the Company in accordance with the Company’s Articles of Association.
8.
To approve the Directors’ remuneration report for the financial year ended 31 October 2012.
9.To authorise the Company and all companies that are its subsidiaries at any time during the period for which this resolution has effect for
the purposes of Section 366 of the Companies Act 2006 (the “Act”) to:
(a)make political donations to political parties or independent election candidates (as such terms are defined in Sections 363 and 364
of the Act), not exceeding £100,000 in aggregate;
(b)make political donations to political organisations other than political parties (as such terms are defined in Sections 363 and 364
of the Act), not exceeding £100,000 in aggregate; and
(c)
incur political expenditure (as such term is defined in Section 365 of the Act), not exceeding £100,000 in aggregate,
during the period beginning with the date of the passing of this resolution and ending at the conclusion of the Company’s next Annual General
Meeting after the date of the passing of this resolution provided that the maximum amounts referred to in (a), (b) and (c) may comprise sums
in different currencies which shall be converted at such rate as the Board may in its absolute discretion determine to be appropriate.
10.THAT for the purposes of Section 551 of the Act and so that expressions used in this resolution shall bear the same meanings as in the said
Section 551):
10.1the Directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot shares and to grant
such subscription and conversion rights as are contemplated by Sections 551(1)(a) and (b) of the Act respectively up to a maximum
nominal amount of £627,116 to such persons and at such times and on such terms as they think proper during the period expiring at
the end of the next Annual General Meeting of the Company (unless previously revoked or varied by the Company in general meeting);
and further
10.2the Directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot equity securities (as
defined in Section 560 of the Act) in connection with a rights issue in favour of the holders of equity securities and any other persons
entitled to participate in such issue where the equity securities respectively attributable to the interests of such holders and persons
are proportionate (as nearly as maybe) to the respective number of equity securities held by them up to an aggregate nominal amount
of £627,116 during the period expiring at the end of the Annual General Meeting of the Company after the passing of this resolution,
subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional
entitlements or legal or practical problems under the laws or requirements of any recognised regulatory body or stock exchange in
any territory; and
10.3the Company be and is hereby authorised to make prior to the expiry of such period any offer or agreement which would or might
require such shares or rights to be allotted or granted after the expiry of the said period and the Directors may allot such shares or
grant such rights in pursuance of any such offer or agreement notwithstanding the expiry of the authority given by this resolution,
so that all previous authorities of the Directors pursuant to the said Section 551 be and are hereby revoked.
102
Overview
Special resolutions
11.THAT, subject to the passing of resolution 10 set out in the Notice convening this Meeting, the Directors be and are empowered in
accordance with Section 570 of the Act to allot equity securities (as defined in Section 560 of the Act) for cash, pursuant to the authority
conferred on them to allot such shares or grant such rights by that resolution as if Section 561(1) and sub-Sections (1)–(6) of Section 562
of the Act did not apply to any such allotment, provided that the power conferred by this resolution shall be limited to:
11.1 the allotment of equity securities in connection with an issue or offering in favour of holders of equity securities (but in the case of the
authority granted under Resolution 10.2 by way of a rights issue only) and any other persons entitled to participate in such issue or offering
where the equity securities respectively attributable to the interests of such holders and persons are proportionate (as nearly as may be) to
the respective number of equity securities held by or deemed to be held by them on the record date of such allotment, subject only to such
exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or
practical problems under the laws or requirements of any recognised regulatory body or stock exchange in any territory; and
and this power, unless renewed, shall expire at the end of the next Annual General Meeting of the Company after the passing of this resolution
but shall extend to the making, before such expiry, of an offer or agreement which would or might require equity securities to be allotted
after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred hereby
had not expired.
Business review
11.2 the allotment (otherwise than pursuant to paragraph 11.1 above) of equity securities up to an aggregate nominal value not
exceeding £94,067;
12.THAT the Company be and is hereby generally and unconditionally authorised for the purpose of Section 701 of the Act to make market
purchases (as defined in Section 693 of the said Act) of ordinary shares of 1 pence each in the capital of the Company (“ordinary shares”)
provided that:
12.1 the maximum number of ordinary shares hereby authorised to be purchased is 18,813,508;
12.2the minimum price (exclusive of expenses) which may be paid for such ordinary shares is 1 pence per share, being the nominal
amount thereof;
12.3the maximum price (exclusive of expenses) which may be paid for such ordinary shares shall be an amount equal to the higher of (i)
5% above the average of the middle market quotations for such shares taken from The London Stock Exchange Daily Official List for
the five business days immediately preceding the day on which the purchase is made and (ii) the higher of the price of the last independent
trade of an ordinary share and the highest current independent bid for an ordinary share as derived from the London Stock Exchange
Trading systems SETS;
12.4the authority hereby conferred shall (unless previously renewed or revoked) expire on the earlier of the end of the next Annual General
Meeting of the Company and the date which is 18 months after the date on which this resolution is passed; and
12.5the Company may make a contract to purchase its own ordinary shares under the authority conferred by this resolution prior to the
expiry of such authority, and such contract will or may be executed wholly or partly after the expiry of such authority, and the Company
may make a purchase of its own Ordinary Shares in pursuance of any such contract.
Governance
13.THAT a general meeting of the Company other than an Annual General Meeting may be called on not less than 14 clear days’ notice, provided
that this authority expires at the conclusion of the Company’s next Annual General Meeting after the date of the passing of this resolution.
BY ORDER OF THE BOARD
S Ahmed
Company Secretary
Registered office:
Brittanic House
Stirling Way
Borehamwood
Hertfordshire WD6 2BT
Dated: 20 February 2013
103
Notice of Annual General Meeting continued
Notes to Notice
(i)A member entitled to attend and vote at the Meeting convened by the above Notice is entitled to appoint a proxy to exercise all or any of the
rights of the member to attend and speak and vote on his behalf. A proxy need not be a member of the Company. A member may appoint
more than one proxy in relation to the Meeting, provided that each proxy is appointed to exercise the rights attached to a different share or
shares held by that member. The right to appoint a proxy does not apply to any person to whom this Notice is sent who is a person nominated
under Section 146 of the Act to enjoy information rights (a “Nominated Person”).
(ii) To appoint a proxy you may:
(a)use the Form of Proxy enclosed with this Notice of Annual General Meeting. To be valid, the Form of Proxy, together with the power
of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of the same, must be received by
post or (during normal business hours only) by hand at Capita Registrars PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU at
www.capitashareportal.com, in each case no later than 12.00 noon on 18 March 2013 or not later than 48 hours before the time fixed
for any adjourned meeting; or
(b)if you hold your shares in uncertificated form, use the CREST electronic proxy appointment service as described in notes (vi), (vii)
and (viii) below.
Completion of the Form of Proxy or appointment of a proxy through CREST will not prevent a member from attending and voting in person.
You may submit your vote electronically at www.capitashareportal.com not later than 48 hours before the time fixed for the Annual General
Meeting or adjourned meeting at which your proxy proposes to vote.
(iii) Any member or his proxy attending the Meeting has the right to ask any question at the Meeting relating to the business of the Meeting.
(iv)Pursuant to Section 360B of the Act and Regulation 41 of the Uncertificated Securities Regulations 2001 (as amended), only shareholders
registered in the register of members of the Company as at 6.00pm on 18 March 2013 shall be entitled to attend and vote at the Annual
General Meeting in respect of the number of shares registered in their name at such time. If the Meeting is adjourned, the time by which a
person must be entered on the register of members of the Company in order to have the right to attend and vote at the adjourned Meeting
is 12.00 noon on the day preceding the date fixed for the adjourned Meeting. Changes to the register of members after the relevant times
shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
(v)In the case of joint holders, the vote of the senior holder who tenders a vote whether in person or by proxy shall be accepted to the exclusion
of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register
of members of the Company in respect of the relevant joint holding.
(vi)CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by
utilising the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those
CREST members who have appointed a voting service provider(s), should refer to their CREST sponsors or voting service provider(s),
who will be able to take the appropriate action on their behalf.
(vii)In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a “CREST Proxy Instruction”)
must be properly authenticated in accordance with the specifications of Euroclear UK & Ireland Limited (“Euroclear UK & Ireland”) and must
contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be
received by the Company’s agent (ID RA10) by the latest time(s) for receipt of proxy appointments specified in the notice of meeting. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application
Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
(viii)CREST members and, where applicable, their CREST sponsors and voting service providers should note that Euroclear UK & Ireland does
not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred,
in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may
treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
(ix)As at 19 February 2013 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consists
of 188,135,088 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 19 February 2013
are 188,135,088.
(x)The information required to be published by Section 311(A) of the Act (information about the contents of this Notice and numbers of shares
in the Company and voting rights exercisable at the meeting and details of any members’ statements, members’ resolutions and members’
items of business received after the date of this Notice) may be found at www.safestore.com.
104
Overview
Notes to Notice continued
(xi)Members representing 5% or more of the total voting rights of all the members or at least 100 persons (being either members who have a
right to vote at the Meeting and hold shares on which there has been paid up an average sum, per member, of £100 or persons satisfying
the requirements set out in Section 153(2) of the Act) may require the Company, under Section 527 of the Act to publish on a website a
statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the Auditors’ report and the conduct of the
audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company ceasing
to hold office since the previous meeting at which annual accounts and reports were laid in accordance with Section 437 of the Act.
The business which may be dealt with at the Annual General Meeting includes any statement that the Company has been required
under Section 527 of the Act to publish on a website.
(xii) A Nominated Person may under an agreement between him/her and the member who nominated him/her, have a right to be appointed
(or to have someone else appointed) as a proxy entitled to attend and speak and vote at the Meeting. Nominated Persons are advised to
contact the member who nominated them for further information on this and the procedure for appointing any such proxy.
Business review
(xiii)If a Nominated Person does not have a right to be appointed, or to have someone else appointed, as a proxy for the Meeting, or does not
wish to exercise such a right, he/she may still have the right under an agreement between himself/herself and the member who nominated
him/her to give instructions to the member as to the exercise of voting rights at the Meeting. Such Nominated Persons are advised to contact
the members who nominated them for further information on this.
Explanatory notes to Resolutions
Resolutions 5, 6 and 7 – Re-election of Richard Grainger, Keith Edelman and Peter Gowers as Directors (ordinary Resolutions).
Under the Company’s Articles of Association, one-third of the Directors are obliged to retire by rotation at each Annual General Meeting.
Richard Grainger, Keith Edelman and Peter Gowers, whose biographical details are set out in the Directors’ biographies, will retire by rotation
this year in accordance with the Articles of Association. Richard Grainger, Keith Edelman and Peter Gowers are offering themselves for re-election
and resolutions 5, 6 and 7 propose their re-election as Directors.
Resolution 9 – Political donations and political expenditure (ordinary Resolution)
Resolution 9 seeks to renew the authority granted at last year’s Annual General Meeting for the Company to make political donations to political
parties, to other political organisations and to independent election candidates or to incur political expenditure.
This resolution does not purport to authorise any particular donation or expenditure but is expressed in general terms as required by the Act
and is intended to authorise normal donations and expenditure. If passed, Resolution 9 would allow the Company and its subsidiaries:
(i)
Governance
It is not the policy of the Company to make political donations of this type and the Directors have no intention of changing that policy. However,
as a result of the wide definitions in the Act of matters constituting political donations, normal expenditure (such as expenditure on organisations
concerned with matters of public policy, law reform and representation of the business community) and business activities (such as communicating
with the government and political parties at local, national and European level) might be construed as political expenditure or as a donation to a
political party or other political organisation and fall within the restrictions of the Act.
to make donations to political parties or independent election candidates up to an aggregate limit of £100,000;
(ii) to make donations to other political organisations up to an aggregate limit of £100,000; and
(iii) to incur political expenditure (as defined in the Act) up to an aggregate limit of £100,000,
during the period up to the conclusion of the next Annual General Meeting of the Company whilst avoiding inadvertent infringement of the statute.
Any political donation made or political expenditure incurred which is in excess of £2,000 will be disclosed in the Company’s Annual Report for
next year, as required by the Act. The authority will not be used to make political donations within the normal meaning of that expression.
Resolution 9 replaces a similar authority put in place at the Annual General Meeting held on 21 March 2012. No payments were made under
this authority.
Resolution 11 – Disapplication of pre-emption rights (special Resolution)
If the Directors wish to allot unissued shares or other equity securities for cash, the Act requires that such shares or other equity securities are
offered first to existing shareholders in proportion to their existing holding. Resolution 11 asks shareholders to grant the Directors authority to allot
equity securities or sell treasury shares for cash up to an aggregate nominal value of £94,067 (being 5% of the Company’s issued ordinary share
capital as at 19 February 2013) without first offering the securities to existing shareholders. The resolution also disapplies the statutory pre-emption
provisions in connection with a rights issue and allows the Directors, in the case of a rights issue, to make appropriate arrangements in relation
to fractional entitlements or other legal or practical problems which might arise. The authority will expire at the next Annual General Meeting.
The resolution replaces a similar resolution passed at the Annual General Meeting of the Company held on 21 March 2012.
105
Resolution 10 – Directors’ authority to allot shares or grant subscription or conversion rights (ordinary Resolution)
The resolution asks shareholders to grant the Directors authority under Section 551 of the Act to allot shares or grant such subscription or conversion
rights as are contemplated by Sections 551(1)(a) and (b) respectively of the Act up to a maximum aggregate nominal value of £1,254,232, being
approximately two-thirds of the nominal value of the issued ordinary share capital of the Company as at 19 February 2013. As at 19 February 2013,
the Company did not hold any treasury shares. £627,116 of this authority is reserved for a fully pre-emptive rights issue. This is the maximum
permitted amount under best practice corporate governance guidelines. The authority will expire at the next Annual General Meeting. The Directors
have no present intention of exercising such authority. The resolution replaces a similar resolution passed at the Annual General Meeting of the
Company held on 21 March 2012.
Notice of Annual General Meeting continued
Explanatory notes to Resolutions continued
Resolution 12 – Purchase of own shares by the Company (Special resolution)
Resolution 12 to be proposed at the Annual General Meeting seeks authority from shareholders for the Company to make market purchases of
its own ordinary shares, such authority being limited to the purchase of 10% of the ordinary shares in issue as at 19 February 2013. The maximum
price payable for the purchase by the Company of its own ordinary shares will be limited to the higher of 5% above the average of the middle
market quotations of the Company’s ordinary shares, as derived from the Daily Official List of the London Stock Exchange, for the five business
days prior to the purchase and the higher of the price of the last independent trade of an ordinary share and the highest current independent bid
for an ordinary shares as derived from the London Stock Exchange Trading System SETS. The minimum price payable by the Company for the
purchase of its own ordinary shares will be 1 pence per ordinary shares (being the amount equal to the nominal value of an ordinary share).
The authority to purchase the Company’s own ordinary shares will only be exercised if the Directors consider that there is likely to be a beneficial
impact on earnings per ordinary shares and that it is in the best interest of the Company at the time. Company law has been changed recently
to allow the Company to hold in treasury any shares purchased by it using its distributable profits. Such shares will remain in issue and be
capable of being resold by the Company or used in connection with certain of its share schemes.
Options to subscribe for up to 5,453,653 ordinary shares have been granted and are outstanding as at 19 February 2013 (being the latest
practicable date prior to publication of this document) representing 2.90% of the issued ordinary share capital at that date (excluding shares held
in treasury). If the Directors were to exercise in full the power for which they are seeking authority under resolution 12, the options outstanding as
at 19 February 2013 would represent 3.22% of the ordinary share capital (excluding shares held in treasury) in issue following such exercise.
Resolution 13 – Calling of general meetings (Special resolution)
Resolution 13 to be proposed at the Annual General Meeting seeks authority from shareholders to hold general meetings (other than Annual
General Meetings) on 14 days’ clear notice. This is permissible under the existing Articles of Association of the Company and the Act. However,
pursuant to the EU Shareholders’ Rights Directive and in accordance with published guidance from the Department of Business, Enterprise
and Regulatory Reform, specific shareholder approval is required annually in order to retain this ability. The Directors believe that there may be
circumstances in which it will be important for the Company to be able to call meetings at such short notice. Accordingly, the Directors believe
that it is important for the Company to retain this flexibility.
Directors’ recommendation
The Board of Directors considers that each of the resolutions being proposed at the Annual General Meeting are in the best interests of the
Company and its shareholders as a whole. Accordingly, the Directors unanimously recommend that shareholders vote in favour of the resolutions
as they intend to do in respect of their own beneficial shareholdings.
106
Overview
Proxy form
For the 2013 Annual General Meeting to be held at 12.00 noon on Wednesday 20 March 2013
I/We the undersigned, being a holder of ordinary shares of 1 pence each of the capital of Safestore Holdings plc (the “Company”), hereby appoint
the duly appointed Chairman of the meeting (see note 1 below) or
(BLOCK CAPITALS PLEASE)
to act as my/our proxy at the Annual General Meeting of the Company to be held at 12.00 noon on 20 March 2013 at Brittanic House, Stirling Way,
Borehamwood, Hertfordshire WD6 2BT and at any adjournment thereof and to vote on my/our behalf as directed below.
Please tick here if this proxy appointment is one of multiple appointments being made
Ordinary resolutions
For
1.
To receive and adopt the Annual Report and Accounts for the year ended 31 October 2012
2.
To re-appoint PricewaterhouseCoopers LLP as auditors
3.
To authorise the Directors to determine the auditors’ remuneration
4.
To declare a final dividend of 3.80 pence per ordinary share for the year ended 31 October 2012
5.
To re-appoint Richard Grainger as a Director of the Company
6.
To re-appoint Keith Edelman as a Director of the Company
7.
To re-appoint Peter Gowers as a Director of the Company
8.
To receive and approve the Directors’ remuneration report for the year ended 31 October 2012
9.
To authorise political donations and political expenditure
Against
Abstain
Discretion
Business review
Please indicate with an “X” in the spaces provided how you wish your votes to be cast on a poll. Should this card be returned duly signed,
but without specific direction, the proxy will vote or abstain at his/her discretion.
10. To authorise the Directors to allot shares subject to the restrictions set out in the resolution
Governance
Special resolutions
11. To authorise the disapplication of pre-emption rights subject to the limits set out in the resolution
12. To authorise market purchases of shares up to a specified amount
13. To reduce the notice period for general meetings other than an Annual General Meeting
Unless otherwise instructed, the proxy may vote as he/she thinks fit or abstain from voting in respect of the resolutions specified and also on any
other business (including amendments to resolutions) that may properly come before the meeting.
Signature
Dated
Full name of registered holder(s)
Address
Postcode
Please return this proxy form to Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive by 12.00 noon
on 18 March 2013.
As an alternative to completing your hard-copy proxy form, you can appoint a proxy electronically at www.capitashareportal.com.
For an electronic proxy appointment to be valid, your appointment must be received by no later than 12.00 noon on 18 March 2013. You will
be asked to enter the investor code shown on your share certificate or dividend tax voucher and agree to certain terms and conditions.
If you hold your shares in uncertificated form, you may appoint a proxy using the CREST electronic proxy appointment service, details of which
are set out in notes vi, vii and viii to the Notice of Annual General Meeting.
107
Proxy form continued
Notes
1.A member of the Company is entitled to appoint a proxy to exercise all or any of his/her rights to attend, speak and vote at a general
meeting of the Company.
A member of the Company may appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to
different shares. To appoint more than one proxy, you should contact Capita Registrars at the address stated in the information included
with this proxy form.
2.A member is entitled to appoint a proxy of his own choice. The Chairman of the meeting will act as proxy unless another proxy is chosen.
A proxy need not be a member of the Company but must attend the meeting in person.
3.In the case of an individual, this proxy form should be signed by the appointer. In the case of a corporation, this proxy form must be
executed under its common seal or under the hand of an officer, attorney or other person duly authorised.
4.In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy in respect of the holding will be accepted
to the exclusion of the votes of the other joint holders. For this purpose seniority is determined by the order in which the names appear in
the register of members in respect of the joint holding.
5.The proxy will act in his/her discretion in relation to any business at the meeting (including any resolution to amend a resolution or to
adjourn the meeting).
6.To be effective, the proxy form and any authority under which it is executed (or a notarially certified copy of such authority) must be
deposited with Capita Registrars at Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours
before the time for holding the meeting.
7.
Completion and return of this proxy form will not prevent a member from attending and voting at the Annual General Meeting.
8.
Any alteration or deletion must be signed or initialled.
108
Directors and advisers
Overview
Directors
R S Grainger
P D Gowers
R D Hodsden
F Vecchioli
A H Martin
A S Lewis K G Edelman
Independent auditors
PricewaterhouseCoopers LLP
Cornwall Court
19 Cornwall Street
Birmingham B3 2DT
(Non-Executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Executive Director)
(Non-Executive Director)
Shareholder information
S Ahmed
Registered office
Brittanic House
Stirling Way
Borehamwood
Telephone (in UK) 0871 664 0300
(Calls cost 10 pence per minute plus network extras)
Registered company number
Fax: +44 (0)1484 600 911
E-mail: ssd@capitaregistrars.com
Web: www.capitashareportal.com
Share Portal: www.capitashareportal.com
Business review
Registrars
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0GA
Company Secretary
Telephone (from overseas) +44 (0)20 8639 3399
4726380
Websites
www.safestore.co.uk
www.safestore.com
Through the website of our Registrar, Capita Registrars, shareholders
are able to manage their shareholding by registering for the Share
Portal, a free, secure, online access to their shareholding.
Bankers
Governance
National Westminster Bank Plc
HSBC Bank Plc
Lloyds TSB Bank Plc
Alliance & Leicester Plc
BRED BanquePopulaire
Bank of Taiwan
Cathay United Bank
Chang Hwa Commercial Bank
Please visit our investor
relations website
Legal advisers
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Eversheds LLP
115 Colmore Row
Birmingham B3 3AL
All the latest news and updates for investors
at www.safestore.com
This Annual Report has been printed on Revive 50 White Silk, a recycled paper stock containing
50% recycled waste and 50% virgin fibre. This report was printed by The Pureprint Group using
their environmental print technology which minimises the impact of printing on the environment.
Vegetable based inks have been used and 99% of dry waste is diverted from landfill. The Pureprint
Group is a CarbonNeutral® company.
109
Brittanic House
Stirling Way
Borehamwood
Tel: 020 8732 1500
Fax: 020 8732 1510
www.safestore.co.uk
www.safestore.com

2012 Annual Report

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